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1 Great Dividend You Can Buy Right Now

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Dividend stocks are everywhere, but many just downright stink. In some cases, the business model is in serious jeopardy, or the dividend itself isn't sustainable. In others, the dividend is so low, it's not even worth the paper your dividend check is printed on. A solid dividend strikes the right balance of growth, value, and sustainability.

Today, and one day each week for the rest of the year, we're going to look at one dividend-paying company that you can put in your portfolio for the long term without too much concern. This isn't to say that these stocks don't share the same macro risks that other companies have, but they are a step above your common grade of dividend stock. Check out last week's selection.

This week, we're going to take a closer look at a company that's brewing up fantastic results in Molson Coors (NYSE: TAP  ) .

The case for going flat
Despite popular belief, alcoholic beverage companies aren't immune to economic fluctuations, and consumers will find ways to trade down even from inexpensive domestic names like Miller Lite and Coors, as well as Anhueser-Busch InBev's (NYSE: BUD  ) Budweiser if it means saving some money. Persistently high unemployment levels and the potential for higher taxes have put significant pressure on Molson Coors' U.S. growth prospects. Also, weaker trade prospects from Europe have tamed the growth potential of both the U.K. and Canada, two other key markets for Molson Coors.

Another factor working against larger operations like Molson Coors is the emergence of small microbreweries that focus on using premium products to create bolder beers. Being a beer snob myself, I can wholeheartedly understand this threat. Boston Beer (NYSE: SAM  ) is probably the largest example of a microbrewery that's grown exponentially in size over just the past decade. According to the Brewers Association, since 1980, the number of U.S. breweries has increased 20-fold!

But have no fear; I'm not letting the simple fact that I'm a beer snob get in the way of what appears to be a great investment in Molson Coors.

The cup runneth o'er
One of the key factors that I look for in a food and beverage company is the ability to keep costs in check, and Molson Coors is a company that's frothy head and shoulders above its competition. By not hesitating to close underperforming breweries and reducing costs in its finance and human resource divisions, Molson Coors saved $107 million in 2011 and looks on pace to match that again this year. These savings are crucial because the added competition from microbrewers means a more robust marketing budget will be needed. Also, higher health care and material costs are likely to weigh on the company, so these savings are vital.

Second, Molson Coors is expanding its presence internationally through acquisitions. With little domestic growth, Molson Coors earlier this year announced a $3.5 billion purchase of StarBev, giving the company access to a relatively untapped Eastern European market. Looking abroad isn't a new idea for beverage companies, as Coca-Cola and PepsiCo have been pushing into China and other emerging markets for years. Expect Molson to do the same, as cost-cutting can only drive margins so high on its own.

One delectable dividend
The final reason to become enamored with Molson's perfectly balanced portfolio is a mixture of valuation and (the whole reason we're looking at the company today) its dividend.

Relative to its largest peer, Anheuser-Busch Inbev, Molson Coors is dirt cheap. The brewer is valued at just 95% of book value, seven times cash flow, and less than 10 times forward earnings, all with a dividend yield of 3%. Compare that to Anheuser-Busch InBev, which is valued at 372% of book value, trades at 11 times cash flow, 17 times forward earnings, and is yielding just half what Molson Coors does at 1.5%. The value difference is absolutely night and day!

The growth in Molson Coors' dividend and its commitment to return value to shareholders is equally phenomenal. Molson Coors' dividend has grown fourfold since 2000 and has doubled in just the past four years. 

Source: Dividata.

As you can see from the annual payouts above, Molson Coors, while not boosting its dividend with any pattern necessarily, has a compounded annual growth rate for its payout of 12.3% since 2000. Its payout ratio (the amount it pays out as a percentage of its profit) is just 42%, leaving plenty of room for future increases and the ability to use the $852 million in free cash flow over the trailing 12 months to help pay down debt and expand overseas.

Foolish roundup
Although Molson Coors is no young pup when it comes to rapidly growing beverage companies, its portfolio of approximately 65 branded alcoholic beverages gives consumers a balanced approach to organic growth with a management team that understands how to make its dollars count. On top of this, shareholders will receive a sector-leading 3% yield for below book value. That's a bargain in a bottle if you ask me!

Is this brewer the next dividend diva?
Boston Beer Company's Samuel Adams brand helped to redefine beer and kick off the craft beer revolution in the United States. Success breeds competition, though, and while just a few years ago Boston Beer had claim over most of the craft beer shelf, today the field is crowded. Can Boston Beer rise above the rest, or will it be squeezed between small local breweries on one side and global beer giants on the other? To help you decide, we've compiled a premium research report filled with everything you need to know about Boston Beer's risks and opportunities. Just click here now to find out whether Boston Beer is a buy today.

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