Up to date on March nineteenth, 2024 by Bob Ciura

The Dividend Aristocrats are a gaggle of 68 corporations within the S&P 500 Index with 25+ consecutive years of dividend will increase.

Throughout the Dividend Aristocrats, there are various kinds of shares with differing yields. A number of the Dividend Aristocrats have greater yields, however these high-yielders are inclined to develop their dividends at a decrease charge annually.

On the identical time, there are Dividend Aristocrats with low yields. Whereas these might look unappealing on the floor, they usually present greater ranges of dividend development from 12 months to 12 months. An instance of that is Brown-Forman (BF.B), a Dividend Aristocrat that has elevated its dividend for 40 consecutive years.

There are at the moment 68 Dividend Aristocrats, together with Brown-Forman. You possibly can obtain an Excel spreadsheet of all 68 Dividend Aristocrats (with metrics like dividend yields and price-to-earnings ratios) by clicking the hyperlink beneath:

 

Disclaimer: Certain Dividend will not be affiliated with S&P World in any approach. S&P World owns and maintains The Dividend Aristocrats Index. The knowledge on this article and downloadable spreadsheet is predicated on Certain Dividend’s personal overview, abstract, and evaluation of the S&P 500 Dividend Aristocrats ETF (NOBL) and different sources, and is supposed to assist particular person traders higher perceive this ETF and the index upon which it’s based mostly. Not one of the data on this article or spreadsheet is official information from S&P World. Seek the advice of S&P World for official data.

Brown-Forman has paid a dividend for 80 years. The corporate sometimes offers excessive dividend will increase annually, even throughout recessions because of its defensive enterprise mannequin.

This text will focus on Brown-Forman’s development prospects, valuation, and outlook.

Enterprise Overview

Jack Daniel’s Tennessee Whiskey bought its begin all the best way again in 1865 when Jack Daniel bought Cave Spring Hole. The next 12 months, he registered the Jack Daniel Distillery, which is right now America’s oldest registered distillery.

Brown-Forman has a big product portfolio targeted on whiskey, vodka, and tequila. Its most well-known model is its flagship, Jack Daniel’s whiskey. Different in style manufacturers embrace Herradura and el Jimador tequila and Finlandia vodka.

Brown-Forman reported revenues of $1.1 billion for its third quarter (fiscal 2024) earnings outcomes. The corporate’s revenues had been down by 1% year-over-year and got here in beneath the analyst consensus. The gross sales efficiency throughout the quarter was additionally weaker in comparison with the earlier quarter. In fixed currencies, Brown-Forman skilled a income decline of two% in comparison with the earlier 12 months’s quarter.

The corporate was capable of develop its gross revenue by 5% thus far this 12 months, regardless of revenues being up by simply 1% on a year-to-date foundation. Due to working leverage and tight price controls, working revenue rose by 25% year-to-date, with earnings-per-share leaping up by 32%.

Development Prospects

Brown-Forman has a powerful development observe document; the corporate even elevated its earnings-per-share over the past monetary disaster, as demand for alcohol will not be particularly cyclical. Historic earnings-per-share had been pushed by a mixture of a number of elements, together with income development, rising margins, and the influence of a declining share depend.

As a result of Brown-Forman owns sturdy manufacturers and is lively within the tremendous and ultra-premium alcoholic drinks markets, which see constant market development, Brown-Forman ought to be capable to maintain its income development going ahead.

This has been an vital development issue for Brown-Forman previously. Brown-Forman’s Jack Daniels model and its American super-premium whiskeys proceed to develop across the globe.

Increased total gross sales enable for margin will increase attributable to higher economies of scale, which makes the corporate extra environment friendly total, and positively impacts its web earnings development charge.

As well as, Brown-Forman has aggressively repurchased shares previously decade, which provides some extra development to its backside line. Going ahead, there’s loads of development potential left as the corporate additional expands its product line inside and outdoors its flagship Jack Daniels model.

Moreover, the corporate will buy development by means of acquisitions, for instance, its current buy of the Diplomático Rum model. This buy launched Brown-Forman into the rising super-premium+ rum class. Diplomático Rum is a super-premium rum from Venezuela and is distributed in over 100 nations.

We’re forecasting 8% annual earnings-per-share development over the following 5 years.

Aggressive Benefits & Recession Efficiency

Brown-Forman has many aggressive benefits. Its well-known manufacturers yield important pricing energy. And it has a extremely worthwhile enterprise, with low manufacturing and distribution prices, due to its international scale. These qualities assist Brown-Forman generate persistently excessive returns on invested capital.

Brown-Forman can be very proof against recessions. That is typical amongst alcohol shares, as their merchandise are usually consumed in better quantity when financial instances are robust. One may argue that alcohol producers truly carry out effectively throughout recessions.

Brown-Forman’s earnings-per-share by means of the Nice Recession are proven beneath:

• 2007 earnings-per-share of $0.76
• 2008 earnings-per-share of $0.77 (1.3% enhance)
• 2009 earnings-per-share of $0.82 (6.5% enhance)
• 2010 earnings-per-share of $0.95 (15.9% enhance)

As you may see, the corporate grew its earnings-per-share yearly by means of the Nice Recession. It is a uncommon accomplishment that demonstrates the corporate’s defensive enterprise mannequin.

Put merely, spirits producers resembling Brown-Forman are among the many most recession-resistant companies.

Valuation & Anticipated Returns

Primarily based on our estimate for 2024 earnings-per-share of $2 and a present share worth close to $52, shares of Brown-Forman are at the moment buying and selling at a P/E ratio of 26.

It is a excessive a number of, even contemplating the energy of Brown-Forman’s enterprise. We estimate a good worth P/E ratio of 24.

If shares had been to revert to 24 instances earnings, this suggests the potential for a -1.6% valuation headwind over the following 5 years. On this foundation, the valuation seems stretched, even by Brown-Forman’s lofty requirements.

A robust earnings development charge of 8% and the 1.7% dividend yield will assist enhance shareholder returns. Total, we estimate annual returns of 8.1% over the following 5 years.

Ultimate Ideas

Brown-Forman has a dominant place in its core product classes. Its flagship Jack Daniel’s model, ought to proceed to steer the whiskey business, with excessive development from its smaller whiskey manufacturers and tequilas. The rising markets are additionally an interesting development catalyst, and naturally, the dividend development streak is enviable.

Brown-Forman is an effective instance of an awesome enterprise buying and selling at an exceptionally excessive valuation. Regardless of a stable dividend and really sturdy enterprise, shares don’t look significantly compelling for buy proper now.

Associated: My High 10 Purchase & Maintain Eternally Shares.

Moreover, the next Certain Dividend databases comprise probably the most dependable dividend growers in our funding universe:

In the event you’re on the lookout for shares with distinctive dividend traits, think about the next Certain Dividend databases:

The foremost home inventory market indices are one other stable useful resource for locating funding concepts. Certain Dividend compiles the next inventory market databases and updates them month-to-month: