Drink Up These Dividends

Dividends are hot right now, providing investors greater stability in unstable times. After reviewing the recent dividend increases in the food industry, I figured it would be a great time to investigate a few beverage companies as well. According to CNNMoney, alcoholic beverage sales grew by almost 10% over the last 12 months, so we'll skip the soda and juice for now and dive straight into adult beverages.

Foreign affairs
Liquor giant Diageo (NYSE: DEO  ) is making the most of foreign growth opportunities. The company is slowly working to acquire a Chinese company with one hand, while pushing its mainstream brands -- like Johnnie Walker -- into the country with the other. As a result, sales growth rose 9% in the Asia Pacific region for the nine months ending in March.  Strong growth is great, especially when it comes to increasing dividends.

Company

TTM Dividend Yield

5-Year % Increase

Diageo

2.9%

5.3%

Brown-Forman (NYSE: BF-B  )

1.7%

8.1%

Source: Yahoo! Finance.

Diageo has a great dividend yield and a solid history of increases behind it. Competitor Brown-Forman has been ramping up its dividend, but a 1.7% yield is not quite high enough to get me interested right now.

Dividends in a can
As much as I love to wax poetic on all things craft beer, it is not the stuff that dividend dreams are made of. For great beer dividends, you have to look to the larger players. Anheuser Busch InBev (NYSE: BUD  ) is the largest brewer by volume, but the King of Beers is not the King of Dividends. In an effort to reduce debt after the 2008 InBev merger, the company has significantly curtailed its dividend. The company has stated that dividend increases completely depend on its ability to repay debt. Its North American volume declined in the first quarter of 2011, which won't make things any easier.

Company

TTM Dividend Yield

5-Year % Increase

Anheuser Busch InBev

2.0%

10.8%

Molson Coors (NYSE: TAP  )

2.8%

11.8%

United Breweries (NYSE: CCU  )

3.7%

8.7%

Source: Yahoo! Finance.

Molson Coors looks great, with a dividend yield just shy of 3% and impressive increases. The real star here, though, is United Breweries -- also known as Compania Cervecerias Unidas -- a beverage midcap based in Santiago, Chile. Its dividend yield is the highest of all the companies listed here, and it has increased its dividend nicely since 2006.  

Toss the empties
Analyzing the trailing-12-month dividend yield and dividend history for a handful of companies is a great way to screen potential investments. Once you have narrowed your group to a few standouts, make sure to check out a few more metrics such as interest coverage and free cash flow payout ratios. And remember, never underestimate the impact of your company's management on your dividends.

Got an eye on dividend stocks? Click here for our free report "13 High-Yielding Stocks to Buy Today."

Fool contributor Aimee Duffy doesn't own shares of the companies mentioned in this article. The Motley Fool owns shares of Diageo and Molson Coors Brewing. Motley Fool newsletter services have recommended buying shares of Compania Cervecerias Unidas, Diageo, and Molson Coors Brewing. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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