Ever wish you could get paid to drink? Well, in a roundabout way, you can! If you buy stock in one of the four breweries or distillers I'll discuss here, you're investing not only in a fundamentally sound company but also one that gives back to shareholders in the form of a dividend.
Taste the Rockies
Molson Coors Brewing's
Molson has a price-to-earnings ratio of 11.88, which is below the industry average of 17.9. It also has a PEG ratio of 0.93, while the average PEG for the industry is 1.31. The PEG ratio is a calculation that takes into account the current P/E and divides the result by future growth estimates. Many investors prefer this metric because it attempts to look into the future, as opposed to always focusing on past performance. A number less than 1 indicates that the stock is undervalued, while a PEG of 1 indicates fair value.
These are not the only numbers indicating that it might be time to buy. Our 180,000-member Motley Fool CAPS community believes Molson can beat the market and have stamped a five-star rating (out of a possible five) on the stock.
Not all investors are as confident, though, because of the 16% net-income drop for the first three quarters of 2011 compared with the same time frame in 2010. A few one-time charges have assisted in lowering net income, but net sales were also lower overall. These numbers all suggest that the Silver Bullet is a slightly risky train ride but still a cheap date for investors who are confident about the long-term prospects.
Walking toward dividends
Diageo also has solid return on equity, currently at 37.45%. Management has been making good decisions with the extra cash the company isn't paying out to shareholders. It's constantly buying smaller regional brewers and distilleries to help expand its global reach.
One thing that might worry shareholders, however, is that Diageo currently has an earnings payout ratio -- the percentage of earnings per share paid out in dividends -- of more than 50%. With constant growth and a strong brand, this number should not be too much of a concern, but investors should keep an eye on it. If Johnnie Walker keeps walking, he'll soon have cut out a clear path all around the world.
King of Beers
As it stands now, Anheuser-Busch is the largest brewer by market cap at $95.35 billion -- but the company also holds the most debt, totaling $45.4 billion. That debt may be one reason the CAPS community has given Anheuser only three stars, but it shouldn't be a major concern, since annual revenue is $38.64 billion and the company's brand name is extremely strong. U.S. market share is more than 48%, and it can boast about having the No. 1 or No. 2 market positions in 18 other countries. I can't even imagine how strong the brand image would look if I had beer goggles on.
Old No. 7
The last company on my list is Brown-Forman
If you were frightened by Anheuser-Busch's debt, you'll be relieved to know that Brown has a rather low debt-to-equity ratio of only 36.78. An increasingly higher number generally means a company is borrowing more money to finance its growth. The current industry average sits at 137, which indicates that the company's competitors are heavily indebted to lenders.
The lack of debt also makes the earnings payout ratio of 35% very sustainable in the future. The CAPS community hands out five stars to Brown-Forman, and with that, I think I can confidently say I'm not the only one who likes a little Jack.
Of these four companies, I prefer Diageo and have recently given it a thumbs-up in CAPS because of its concentration on global growth and its above-average dividend yield. If you'd like to know about more dividend-paying stocks, check out our free article, "13 High-Yielding Stocks to Buy Today."
Although Fool contributor Matt Thalman owns no stock in any of the companies mentioned here, he does occasionally enjoy their beverages. The Motley Fool owns, and Motley Fool newsletter services have recommended buying, shares of Diageo and Molson Coors Brewing. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.