Many foodies know the Latin phrase “In vino veritas” — or, “In wine there is truth.” Well when it comes to investing, there might be profit as well as truth in wine stocks. The big reason: strong growth in wine consumption, particularly in the U.S.
Last year, the U.S. actually surpassed France to become the largest wine-consuming nation in the world — and overall wine consumption rose for its 17th consecutive year to 303.1 million nine-liter cases. RNCOS Industry Research, which tracks the U.S. wine industry, last week projected total U.S. wine market production would hit 780 million gallons by 2014. That’s a lot of grapes to stomp.
With the CDC also encouraging (moderate) wine consumption for the health benefits, it’s hard to see anywhere to go but up for the wine industry with the U.S. To help you tap into that strength, here are three winery stocks with great numbers and a strong finish:
Diageo plc (NYSE:DEO). Diageo is a diversified premium spirits company. At $78.53, Diageo is trading at about 8% below its 52-week high of $85.53 on June 2. With a market cap of $49.16 billion, DEO has a price-to-earnings growth (PEG) ratio of 1.27, which means it could be slightly overvalued. DEO has had a reliable dividend yield averaging 2.7% over the past five years and currently pays a yield of 4.20%. While the company has $2.50 billion total cash versus $12.94 billion in total debt, its levered-free cash flow of $2.27 billion is notable.
Constellation Brands (NYSE:STZ). Constellation boasts well-known wine brands like Clos du Bois and Robert Mondavi, as well as a wide range of other spirits. At $19.14, Constellation is trading more than 16% above its 52-week low of $16.42 last month. With a market cap of $4.10 billion, STZ has a PEG ratio of 1.14, meaning the stock is fairly valued. Constellation does not currently pay a dividend. The company has total cash of $13.40 million, compared to total debt of $3 billion. STZ’s levered-free cash flow is $800.50 million.
Altria Group (NYSE:MO). This company is probably better known for its tobacco industry holdings like Phillip Morris, but it still makes a good chunk of change with its Ste. Michelle Wine Estates. At $26.90, Altria is trading more than 15% above its 52-week low of $23.20 last month. With a market cap of $55.72 billion, MO’s PEG ratio is 1.65, suggesting that the stock is overvalued. The stock went ex-dividend last week with a yield of 6.1%. While MO’s dividend yield has bounced around a bit over the past five years (from a low of 3.84% in 2006 to a high of 11.16% in 2008), investors are getting paid reliably. With total cash of $2.06 billion and total debt of $13.69 billion, MO boasts a levered-free cash flow of $4.55 billion.
As of this writing, Susan J. Aluise did not hold a position in any of the stocks named here.
