Thanks to recent industry consolidation, Inside Value recommendation Anheuser-Busch
In addition to being left out of the consolidation race, Anheuser-Busch is struggling against titanic demographic shifts. An aging global population no longer identifies with the party-hearty image that Anheuser-Busch and the other brewers had tried to cultivate for decades. To add insult to injury, the growing trend for universities to crack down against keg parties and other beer-soaked pastimes has seriously dented beer's market share of folks in their earliest drinking years. Thanks to these relentless market shifts, beer has been slowly losing market share to hard liquor, distilled spirits, and wine. Spirit makers Constellation Brands
Thanks to the shifting market preferences, owners of Anheuser-Busch's stock hold shares in the third-largest company in a shrinking industry. That's not exactly a platform of strength from which the company can springboard to profits and shareholder gains. Don't just take my word for it; take a gander at the company's recently reported data from the Securities and Exchange Commission. Anheuser-Busch's financials are showing signs of the strains from being in such an ugly position. Here's some key data from this past year.
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Sales have stagnated, and both operating cash flows and net income have turned in a decidedly negative direction. Yet for some inexplicable reason, Anheuser-Busch's board of directors still decided to increase the company's dividend by some 10% this summer, in an amazing defiance of the company's poor financial showing. You'll find no bigger fan of strong and rising dividends than me. Even so, I'm scratching my head over the decision to hike that payment during a prolonged period of financial weakness. It's almost like watching Emperor Nero fiddling while Rome burned. When photography titan Eastman Kodak faced similar demographic-driven issues, thanks to the onslaught of digital pictures, it at least had the decency to cut its dividend while it retooled its business for the world of the future.
The Foolish bottom line
As the third-largest company in a shrinking line of business, Anheuser-Busch has some serious work to do if it wants to remain globally competitive for the long run. Until I see either concrete execution of a turnaround or other successful plans to grow the business, my money is staying away.
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