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What are we looking for?

Sustainable dividends from beverage producers tapping key trends.

The screen

Canadians continue to enjoy the summer weather – often whilst holding an alcoholic beverage. That includes turning to a growing number of new products introduced to lift the flagging sales of alcohol producers.

Mixed cocktails in cans, including tequila sodas, and hard seltzers are prominent among new market offerings. Organic wines have also spurred industry sales, while alcohol-free beers and spirits (sometimes in cans as “mocktails”) are gaining their own wide following.

In our search for the industry’s sustainable-dividend payers, we’ve weighed market share, revenue and earnings histories, and growth prospects. We then applied our TSI Dividend Sustainability Rating System to a short list of producers. It awards points to a stock based on key factors:

  • One point for five years of continuous dividend payments – two points for more than five;
  • Two points if it has raised the payment in the past five years;
  • One point for management’s commitment to dividends;
  • One point for operating in non-cyclical industries;
  • One point for limited exposure to foreign currency rates and freedom from political interference;
  • Two points for a strong balance sheet, including manageable debt and adequate cash;
  • Two points for a long-term record of positive earnings and cash flow to cover dividends;
  • One point if the company’s an industry leader.

Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.

More about TSI Network

TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor, and the TSI Dividend Advisor. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Eight beverage giants tapping key trends and paying sustainable dividends

Ranking*CompanyTickerDiv. Sustain. RatingPointsDiv. Yld. (%)Mkt. Cap. ($ Mil.)**1Y Ttl. Rtn. (%) Recent Price ($)**
1Molson Coors Brewing Co.TAP-NAbove Average92.811,591.010.354.19
2Brown-Forman Corp.BF-B-NAbove Average91.035,622.17.475.90
3Corby Spirit and Wine Ltd.CSW-A-TAbove Average85.4488.9-4.517.70
4Andrew Peller Ltd.ADW-A-TAbove Average84.1267.4-31.86.06
5Diageo Plc (ADR)DEO-NAbove Average82.1108,196.3-4.7190.65
6Pernod Ricard SA (ADR)PRNDY-OTCAbove Average81.249,513.2-17.538.91
7Constellation Brands Inc.STZ-NAbove Average71.345,273.011.4246.58
8Anheuser-Busch InBev (ADR)BUD-NAbove Average70.8102,445.4-14.953.19

Source: Dividend Advisor

*Ranking is determined by TSI Dividend Sustainability Score. Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements. ** Share price and market cap are in native currency.

Our TSI Dividend Sustainability Rating System generated eight stocks: Andrew Peller Ltd., based in Grimsby, Ont., sells wine and whisky. Its new entries in the ready-to-drink refreshment category include No Boats on Sunday ciders and seltzers. Molson Coors Brewing Co. – jointly based in Montreal and Colorado – is one of the world’s leading beer makers, with brands such as Coors Light, Molson Canadian and Carling. It’s now expanding into new non-beer products such as Coors Hard Selzer.

Constellation Brands Inc., an international alcoholic-beverage leader based in Victor, N.Y., also keeps adding new drinks. The latest is a venture with Coca-Cola Co. for the cocktail Fresca Mixed. France’s Pernod Ricard SA counts Absolut Vodka and Chivas Regal scotch among its brands. Meanwhile, Toronto’s Corby Spirit and Wine Ltd., 46-per-cent held by Pernod Ricard, is the company behind J.P. Wiser’s Whisky and is one of this country’s leading importers. Corby’s newest imports include Pernod Ricard’s Absolut Watermelon vodka.

Guinness beer and Johnnie Walker scotch are just some of Britain-based Diageo PLC’s premium labels. And Diageo is an innovator, too, with new drinks such as Gordon’s 0.0% and Smirnoff Raspberry Crush. Kentucky’s Brown-Forman Corp. counts Jack Daniel’s – now with flavours including apple and honey – among its global brands. And finally, Belgium’s Anheuser-Busch InBev SA sells Budweiser, Stella Artois and more – including a new line of Bud Light Seltzers.

We advise investors to do additional research on any investments we identify here.

Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

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