Updated on May 23rd, 2022 by Bob Ciura
Beer stocks, just like other beverage stocks, come in several different forms. Companies that are engaged in the beer industry offer direct exposure through manufacturing and distribution of beer, while other companies in adjacent industries offer indirect exposure through equity stakes in beer companies.
The beer industry is attractive for long-term income investors. Beer companies enjoy tremendous recession-resistance and consistent profits, which are used in large part to pay dividends to shareholders.
With this in mind, we created a downloadable spreadsheet that focuses on beer stocks. You can download our full Excel spreadsheet of beer stocks (with important financial metrics like dividend yields and payout ratios) by clicking the link below:
This article will discuss the top six beer stocks, each of which offer investors strong competitive advantages and decent long-term growth prospects. As a result, they may fit well in the diversified long-term dividend growth portfolios that we aspire to help investors build here at Sure Dividend.
The following stocks were selected according to the Sure Analysis Research Database. The six beer stocks are ranked according to their 5-year expected annual returns, in ascending order from lowest to highest.
Table Of Contents
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- Beer Stock #6: Constellation Brands (STZ)
- Beer Stock #5: Diageo (DEO)
- Beer Stock #4: Anheuser-Busch InBev (BUD)
- Beer Stock #3: Altria Group (MO)
- Beer Stock #2: Molson Coors (TAP)
- Beer Stock #1: Ambev SA (ABEV)
Beer Stock #6: Constellation Brands (STZ)
- 5-year expected annual returns: 5.1%
Constellation Brands was founded in 1945 and has grown into a global alcoholic beverage giant, producing and distributing over 100 brands of beer, wine, and spirits, including Corona, Modelo Especial, Modelo Negra, Pacifico, Ballast Point, Funky Buddha Brewery, Robert Mondavi, Clos du Bois, Kim Crawford, Mark West, Black Box, SVEDKA Vodka, Casa Noble Tequila and High West Whiskey. The company also has a stake in cannabis company Canopy Growth (CGC).
On April 7th, 2022, Constellation Brands reported Q4 and FY 2022 results for the period ending February 28th, 2022. (Constellation Brands’ fiscal year ends the last day of February). For the fiscal year, the company recorded $8.8 billion in net sales, a 2% increase compared to fiscal year 2021. This result was driven by an 11% year-over-year increase in beer sales, offset by a 19% decline in wine and spirits sales.
Adjusted earnings-per-share equaled $10.20 compared to $9.97 in 2021. Constellation Brands also provided its fiscal 2023 outlook. The company expects $11.20 to $11.50 in adjusted EPS. In addition, beer sales are anticipated to increase 7% to 9% and wine and spirit sales are expected to be down -1% to -3%.
Despite its clear strengths, Constellation Brands does have some risks. These include its heavy dependence on Mexican Beer (which supplies over two-thirds of its operating profits), ongoing and intensifying competition from sizable rivals, and its large stake in Canopy Growth.
Constellation Brands stock trades for a P/E ratio of 21.0, above our fair value P/E of 19. A declining valuation multiple could reduce annual returns. Overall, we anticipate Constellation Brands delivering 5.1% total returns over the next five years from valuation headwinds, plus 5.5% annual earnings-per-share growth and the 1.4% dividend yield
Click here to download our most recent Sure Analysis report on STZ (preview of page 1 of 3 shown below):
Beer Stock #5: Diageo (DEO)
- 5-year expected annual returns: 6.5%
Diageo is one of the oldest and largest alcoholic beverages companies. It dates all the way back to the 17th century and today owns 20 of the world’s top 100 spirits brands. Diageo manufacturers popular spirits and beer brands, such as Johnnie Walker, Smirnoff, Captain Morgan, Baileys, Tanqueray, Guinness, Crown Royal, Ketel One, and many more.
Diageo released earnings results for the first half of fiscal year 2022 on 1/27/2022. Net sales increased 15.9% with organic growth surging 20%. Organic volumes were up 9.3% as the company lapped a challenging period as a result of the COVID-19 pandemic. Each region had at least 13% organic sales growth, led by a 45% improvement in Latin America and a 27% gain in Europe.
Source: Investor Presentation
More than 80% of the portfolio maintained or gained market share. Super Premium and Premium brands had organic growth of 31% and 27%, respectively. Tanqueray, Crown Royal, Johnnie Walker, Guinness, and Don Julio had organic sales growth of 4%, 5%, 7%, 10%, and 41% respectively. Smirnoff fell 4% while Baileys was down 10%. Analysts expect Diageo to earn $7.69 in 2022.
We estimate 8% annual earnings growth through 2025, comprised of mid-single-digit organic revenue growth, margin expansion, and resumption of share repurchases.
Similar to its peers, Diageo’s strong growth is driven by its brand power and lower cost competitive advantages. With 3 of the top 10, 13 of the top 50, and 20 of the world’s top 100 global premium distilled spirits brands, the company enjoys strong consumer loyalty and new consumer preference. This enables them to charge higher prices and increase their margins and returns on invested capital.
Furthermore, the company’s large global volume gives them strong pricing power with suppliers and better economies of scale in production and distribution, cutting costs and further improving margins and economies of scale.
In addition to the typical geopolitical, economic, and foreign exchange risks shared by all global alcoholic beverage producers, Brexit poses a unique risk to Diageo. Given that it is headquartered and produces much of its product in Scotland, potential increases in tariffs with the E.U. could hurt the firm’s competitiveness and/or profitability in one of its major markets.
Diageo pays a semi-annual dividend, and increases the dividend regularly. The stock has a dividend yield of 1.7%.
Diageo shares currently trade for a price-to-earnings ratio of 23.9, slightly above our estimate of fair value at 20. This implies negative returns from a declining P/E ratio.
Overall, we expect the company to generate 6.5% annualized total returns over the next half decade as 8% earnings-per-share growth, a 1.7% dividend yield and -3.2% annual returns from a declining P/E multiple. Diageo earns a hold recommendation from Sure Dividend, but we believe the other names on this list offer even higher total return potential.
Click here to download our most recent Sure Analysis report on Diageo (preview of page 1 of 3 shown below):
Beer Stock #4: Anheuser-Busch InBev SA/NV (BUD)
- 5-year expected annual returns: 7.6%
Anheuser-Busch InBev SA/NV is the largest brewer in the world thanks to the 2008 merger of InBev and Anheuser-Busch and the 2016 acquisition of SABMiller. The company produces, markets and sells over 500 different beer brands around the world and owns five of the top ten beer brands and 18 brands with over $1B in sales. These include Budweiser, Stella Artois and Corona.
Overall, AB-InBev has 17 individual beers that each generate at least $1 billion in annual sales. You can see a detailed analysis of AB-InBev’s 17 billion-dollar brands here.
AB InBev reported excellent Q4 2021 results on February 24th, 2022. Companywide revenue rose 12.1% to $14,198M from $12,767M as total volumes rose 3.6% and revenue per hl was up 8.1%. Own beer volumes were up +3.4% and nonbeer volumes grew +3.8%. Volumes were up in Middle Americas (+3.8%), South America (+0.4%), EMEA (+8.4%), Asia Pacific (+8.9%), and North America (+1.0%).
The three global brands of Budweiser (+15.2%), Stella Artois (+19.3%), and Corona (+42.4%) performed well with revenues increasing in the double-digits outside of their home markets. Normalized earnings per share decreased to $0.74 from $0.81 in comparable periods.
AB InBev’s strategy of premiumization is being led by its three global brands.
Source: Investor Presentation
AB-InBev cut its dividend late in 2018 in an effort to spend extra cash on debt reduction instead of a sizable dividend. AB-InBev also cut its final 2019 dividend payout by 50%. This dividend reduction saved the company roughly $1.1 billion, which has helped with debt repayment. The stock currently yields 1%.
We expect AB-InBev to grow earnings-per-share by 3% per year over the next five years. Growth will be fueled by sales growth through higher prices and volumes, as well as share repurchases. Shares trade for 17.2 times our earnings estimates, which is below our estimate of fair value at 20 times earnings.
Total returns are expected at 7.6% per year over the next five years.
Click here to download our most recent Sure Analysis report on BUD (preview of page 1 of 3 shown below):
Beer Stock #3: Altria Group (MO)
- 5-year expected annual returns: 8.2%
Altria Group was founded by Philip Morris in 1847 and today has grown into a consumer staples giant. While it is primarily known for its tobacco products, it is significantly involved in the beer business due to its 10% stake in global beer giant Anheuser-Busch InBev.
The flagship brand continues to be Marlboro, which commands over 40% retail market share in the U.S.
Source: Investor Presentation
Altria also has a 10% ownership stake in global beer giant Anheuser-Busch InBev, in addition to large stakes in Juul, a vaping products manufacturer and distributor, as well as cannabis company Cronos Group (CRON).
On 04/28/22, Altria reported first quarter FY22 results. Adjusted diluted earnings-per-share increased 4.7% to $1.12 year-over-year. Net revenue stood at $5.9 billion, down by 2.4% mainly caused by the sale of the wine business in October 2021. Reported diluted earnings per share stood at $1.08, up by 40.3% year-over-year. Revenue decreased 1.2% to $4.82 billion year-over-year.
Meanwhile, Altria reported approximately $1.2 billion remaining under the company’s existing $3.5 billion share repurchase program which is expected to complete by December 31, 2022. The company also reaffirmed full-year 2022 adjusted diluted earnings-per-share guidance of $4.79-$4.93.
The long-term future is cloudy for cigarette manufacturers such as Altria, which is why the company has invested heavily in adjacent categories to fuel its future growth.
The company purchased a 55% equity stake in Canadian marijuana producer Cronos Group, invested nearly $13 billion for a 35% equity stake in e-vapor manufacturer Juul Labs, and recently acquired an 80% ownership stake in Switzerland-based Burger Söhne Group, for its on! oral nicotine pouch brand. These investments could provide Altria much-needed growth as the cigarette market steadily declines.
However, despite these risks we continue to view Altria favorably, due in large part to its excellent dividend history and high yield. Altria has increased its dividend for over 50 years, which places it on the list of Dividend Kings.
You can see the full downloadable spreadsheet of all 44 Dividend Kings (along with relevant financial metrics that matter) by clicking on the link below:
It is not only one of the most attractive picks in the tobacco space, but it is one of the most attractive stocks in the beer sector thanks to its investment in BUD.
We expect expect Altria to grow adjusted EPS by approximately 1.2% per year over the next five years. In addition to the 7.0% dividend yield (with a flat P/E multiple), total returns are expected at 8.2% per year over the next five years
Click here to download our most recent Sure Analysis report on Altria (preview of page 1 of 3 shown below):
Beer Stock #2: Molson Coors Brewing Company (TAP)
- 5-year expected annual returns: 9.1%
Molson Coors Brewing Company was founded all the way back in 1873 and has since grown into one of the largest U.S. brewers, with a variety of brands including Coors Light, Coors Banquet, Molson Canadian, Carling, Blue Moon, Hop Valley, Crispin Cider, as well as the Miller brands including Miller Lite.
In addition to its sizable U.S. presence, the company has diversified internationally into Canada, Europe, Latin America, Asia, and Africa.
On February 23rd, 2022, the company announced a 12% increase to the quarterly dividend to $0.38 per share. On May 3rd, 2022, Molson Coors reported first quarter results for the period ending March 31st, 2022. For the quarter, the company generated net sales of $2.2 billion, a 16.7% increase compared to Q1 2021.
Source: Investor Presentation
Net sales were up 8.5% in North America, but up stronger by 84% in Europe, the Middle East and Africa, and Asia-Pacific. Reported net income equaled $174 million or $0.70 per share compared to $126 million or $0.39 per share in Q1 2021. On an adjusted basis, earnings-per-share equaled $0.29 versus $0.01 prior.
Molson Coors continues to expect net sales to increase by a mid-single digit rate for 2022, on a constant currency basis.
Molson Coors enjoys long-standing, entrenched relationships with distributors, retailers, restaurants, bars, and pubs as well as strong consumer loyalty.
As a result, the long-term outlook for the company remains solid, especially as their balance sheet continues to improve. Furthermore, the company’s international markets will likely continue to be a source of growth, offsetting any lingering sluggishness in the U.S. beer market.
The primary risk facing the company is its heavy dependence on the U.S. beer market, which recently has been lackluster and weighing down its overall results significantly. Furthermore, as the business grows internationally, they will face increasing foreign exchange and geopolitical risks.
Molson Coors has one of the most attractive valuation of the major alcohol stocks. Molson Coors stock trades for a price-to-earnings ratio of 12.6. We view fair value as a price-to-earnings ratio of 14.0, which means Molson Coors stock could generate returns of 6.5% per year just from expansion of its valuation multiple.
Combined with 4% expected EPS growth and the 2.1% dividend yield, we expect total returns of 9.1% per year over the next five years.
Click here to download our most recent Sure Analysis report on Molson Coors (preview of page 1 of 3 shown below):
Beer Stock #1: Ambev SA (ABEV)
- 5-year expected annual returns: 11.3%
Ambev SA is the largest brewer in Latin America, with a presence in 16 countries. It is engaged in producing and distributing alcoholic and non-alcoholic beverages.
Its main business is beer, with brands including Skol, Brahma, Antarctica, Quilmes, Labatt, Presidente, and also has a licensing agreement to produce, bottle, sell and distribute Budweiser, Stella Artois, and Corona in South America.
Ambev reported Q4 2021 results on February 24th, 2022. Company-wide net revenue increased 16.2% to $4,321.3M from $3,643.1M and earnings per share declined (-46.9%) to $0.045 from $0.084 on a year-over-year basis. Profits declined due to a one-time tax credit in Q4 2020 and higher commodity prices.
The top line grew due to a 0.8% volume increase and 15.2% increase in net revenue per hectoliter. Ambev is benefiting from recovery in global economies and less restrictions in most markets.
Source: Investor Presentation
Volumes were up in Canada (+4.3%), Central America and Caribbean (+20.5%), Latin America South (+8.7%), and Brazil NAB (+1.9%), offset by a decline in Brazil (-3.1%). Net revenue per hectoliter increased in Brazil (+9.3%), Central America and Caribbean (+16.0%), Latin America South (+31.4%), Canada (+3.7%), and Brazil NAB (+11.7%).
Rising vaccination rates, gradual lifting of restrictions, and pent-up demand are driving sales. Ambev is also expanding its direct-to-consumer distribution through technology initiatives and urban distribution centers.
We are expecting approximately 3% annual earnings growth over the next five years. Ambev stock trades for a 2022 price-to-earnings multiple of 17.1, below our estimate of fair value at 22 times earnings. This shows that the stock appears to be under-valued.
The stock also has a trailing dividend yield of 3%, the product of the precipitous decline in the share price. Investors should note that because the dividend is declared in Brazilian currency, payment in U.S. dollars will fluctuate based on exchange rates. Ambev looks poised to deliver total returns of 11.3% per year over the next five years.
Click here to download our most recent Sure Analysis report on Ambev (preview of page 1 of 3 shown below):
The beer industry has numerous players with global diversification and strong competitive advantages. Each offers investors a unique angle on the market. Some focus heavily on individual geographies, such as Molson Coors in the U.S. market and Ambev in Latin America, while Altria offers indirect exposure to the beer industry through its stake in AB InBev.
Companies that operate in beer widely enjoy strong profit margins, and the ability to withstand even the deepest recessions. Beer should continue to see steady demand each year, and the largest beer stocks enjoy high profit margins thanks to their ability to raise prices over time.
These six beer stocks have positive growth prospects and return cash to shareholders through hefty dividends. Risk-averse income investors looking for steady dividend payouts should take a closer look at beer stocks, particularly in uncertain economic times.
The following lists contain many more high-quality dividend stocks:
- The Dividend Aristocrats List is comprised of 65 stocks in the S&P 500 Index with 25+ years of consecutive dividend increases.
- The High Yield Dividend Aristocrats List is comprised of the 20 Dividend Aristocrats with the highest current yields.
- The Dividend Achievers List is comprised of ~350 stocks with 10+ years of consecutive dividend increases.
- The Dividend Kings List is even more exclusive than the Dividend Aristocrats. It is comprised of 44 stocks with 50+ years of consecutive dividend increases.
- The High Yield Dividend Kings List is comprised of the 20 Dividend Kings with the highest current yields.
- The Blue Chip Stocks List: stocks that qualify as Dividend Achievers, Dividend Aristocrats, and/or Dividend Kings
- The High Dividend Stocks List: stocks that appeal to investors interested in the highest yields of 5% or more.
- The Monthly Dividend Stocks List: stocks that pay dividends every month, for 12 dividend payments per year.
- The Dividend Champions List: stocks that have increased their dividends for 25+ consecutive years.
Note: Not all Dividend Champions are Dividend Aristocrats because Dividend Aristocrats have additional requirements like being in The S&P 500.
- The Dividend Contenders List: 10-24 consecutive years of dividend increases.
- The Dividend Challengers List: 5-9 consecutive years of dividend increases.