by Alyssa Oursler | August 13, 2013 7:00 am
With a soaring first half of 2013 in the books, many investors are bracing themselves for a slowdown.
Of course, while being prepared is always smart, there’s no reason to panic.
Instead, folks who already have their money in reliable dividend stocks can take a deep breath, as the payouts will keep coming no matter what the next few months hold. Meanwhile, investors looking for stability would be smart to snatch up some high-income names on the cheap in the event of a downturn.
While you can find dividend stocks in all corners of the market, one great place to look is in the world of beverage stocks. As the industry consolidates and expands into new markets, the stocks have plenty of room for more upside.
At the same time, several big-name beverage companies also offer solid payouts for dividend-thirsty investors. Let’s take a look at four of them, from lowest yield to highest:
Dividend Yield: 2.4%
While sipping on a Coors Light might leave a lot to be desired, investing in its maker Molson Coors Brewing (TAP) sure doesn’t.
So far this year, Molson Coors has posted a solid 23% climb — 5 percentage points better than the broader market. In the most recent quarter, TAP’s profits rose 165%, thanks in part to its acquisition of European brewer StarBev. That was good for earnings of $1.51 per share — 13 cents better than analysts were expecting. Oh, and its revenue growth continue a quarterly streak that’s well into the double digits.
That’s only half of TAP’s appeal, too. The company has been paying a dividend since 1970, and that payout has more than tripled over the last decade. Right now, the 32-cent quarterly payout is good for a yield north of 2.4%.
There’s good reason to think that payout will keep growing too. For one, the current dividend makes for a low payout ratio right around 30% based on 2014 earnings. Plus, Molson currently has around $800 million in cash and short-term investments, along with annual operating cash flow of $983 million.
Dividend Yield: 2.8%
Next up, we have Coca-Cola (KO), which owns or licenses more than 500 nonalcoholic beverages, including Coca-Cola (duh), Fanta, Dasani and others. The blue chip — which boasts a market cap of more than $176 billion — has been a bit sleepy so far in 2013, but a long-standing dividend sweetens the stock’s appeal.
KO has been paying a dividend since 1893 — a record good enough to make it one of InvestorPlace‘s Dependable Dividend Stocks. Last year, the company returned $9.1 billion to shareholders through dividends and share repurchases, while its current 57-cent payout is good for a yield of 2.8%.
Coca-Cola also has a rock-solid balance sheet that should keep its eye-popping payout run going for some time. The company has more than $10 billion in annual cash flow and $19 billion in cash and short-term investments.
No wonder its dividend has increased by 150% in the last decade alone.
Dividend Yield: 3.3%
Another company good for consistent payouts is Dr Pepper Snapple Group (DPS). The stock climbed out of the recession at a pretty rapid pace, but has been moving relatively sideways of late. Year-to-date, its return is a mere 6%.
Of course, that has made DPS’ quarterly payout all that much more important.
Dr Pepper Snapple is the newest dividend-payer on the list; it started rewarding investors in late 2009. In that short time period, the company’s dividend has already grown from a 15-cent quarterly payout to 38 cents, good for a current yield just under 3.3% — not too shabby.
Plus, while DPS’s growth has been slow of late, it’s smaller than KO and PEP, and is only currently operating in the U.S., Canada and Mexico. That gives the already strong brand the opportunity for global expansion — part of the reason Dividend Growth Investor snatched up some shares at the start of the month.
Dividend Yield: ~3.6%
Companhia de Bebidas das Americas (ABV) — or just AmBev — has struggled a bit in 2013, but that cooldown was likely necessary after its rocketing run out of the recession. ABV hit an all-time high at the end of January but fell off soon after, with a year-to-date slide totaling 11%.
Still, the beverage company has strong prospects and a nice dividend. Its earnings are expected to fall slightly this year, but are slated to rebound 12% in 2014. ABV also has exposure to emerging markets like Brazil thanks to deals with Pepsi and Anheuser-Busch InBev (BUD). That means big-time growth potential to go along with a big-time dividend.
One thing to note, though, is that ABV’s payouts aren’t regular. The company pays back a variety of dividends and interest on shareholder’s equity, historically anywhere from two to six payments.
Still, the total payout has increased over the last three years, going from $2.2 billion to $2.42 billion from 2010 to 2012. Plus, ABV’s most recent payouts give it a yield somewhere between 3% and 3.6%.
As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.
Source URL: http://investorplace.com/2013/08/beverage-dividend-stocks-to-buy/
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