Shares of beer giant Anheuser-Busch InBev SA/NV (NYSE:BUD) fell as much as 11.4% in trading Thursday after the company reported earnings and cut its dividend. There wasn't much of a recovery as the day went on, and at 12:15 p.m. EDT, shares were still down 10%.
Third-quarter revenue was up 4.5% to $14.7 billion, but volume delivered only grew 0.2% in the quarter. While revenue growth wasn't impressive, profit attributable to shareholders more than doubled to $2.06 billion, and earnings were $1.04 per share. The problem was, analysts were expecting $1.15 per share.
What really threw investors for a loop was AB InBev announcing a dividend of 1.80 euros per share for 2018, half of what it paid last year. And 0.80 euros would be paid in the interim payment to shareholders. Management said some of the cash savings would be used to pay down debt and that the dividend would slowly increase over time. But if you're a dividend investor, it's hard not to jump ship today.
AB InBev has squeezed more and more income out of each beer it sells, but the long-term challenge for the business is that beer volumes aren't growing. Craft beers and local microbreweries continue to take market share, and that's going to cap both pricing power and volume for a big beer brand like AB InBev. That challenge hit investors hard with the dividend cut today. I wouldn't assume a turnaround is anywhere in sight for this beer brand.