Dividend Aristocrats In Focus: Brown-Forman Company

Up to date on March eighth, 2025 by Felix Martinez

The Dividend Aristocrats are a gaggle of 69 firms within the S&P 500 Index which have elevated their dividends for 25+ consecutive years.

Throughout the Dividend Aristocrats are varied sorts of shares with differing yields. Among the Dividend Aristocrats have increased yields, however these high-yielders are inclined to develop their dividends at a decrease fee every year.

On the identical time, there are Dividend Aristocrats with low yields. Whereas these could look unappealing on the floor, they usually present increased dividend progress ranges from 12 months to 12 months. An instance is Brown-Forman (BF.B), a Dividend Aristocrat that has elevated its dividend for 41 consecutive years.

There are at present 69 Dividend Aristocrats, together with Brown-Forman. You possibly can obtain an Excel spreadsheet of all 69 Dividend Aristocrats (with metrics like dividend yields and price-to-earnings ratios) by clicking the hyperlink beneath:

Disclaimer: Certain Dividend shouldn’t be affiliated with S&P World in any method. S&P World owns and maintains The Dividend Aristocrats Index. The data on this article and downloadable spreadsheet relies on Certain Dividend’s personal evaluate, abstract, and evaluation of the S&P 500 Dividend Aristocrats ETF (NOBL) and different sources, and is supposed to assist particular person traders higher perceive this ETF and the index upon which it’s primarily based. Not one of the info on this article or spreadsheet is official knowledge from S&P World. Seek the advice of S&P World for official info.

Brown-Forman has paid a dividend for 80 years. Because of its defensive enterprise mannequin, the corporate usually offers excessive dividend will increase every year, even throughout recessions.

This text will focus on Brown-Forman’s progress prospects, valuation, and outlook.

Enterprise Overview

Jack Daniel’s Tennessee Whiskey received its begin all the way in which again in 1865 when Jack Daniel bought Cave Spring Hole. The next 12 months, he registered the Jack Daniel Distillery, which is at this time America’s oldest registered distillery.

Brown-Forman has a big product portfolio targeted on whiskey, vodka, and tequila. Its most well-known model is its flagship, Jack Daniel’s whiskey. Different in style manufacturers embody Herradura and El Jimador tequila and Finlandia vodka.

Brown-Forman reported revenues of $1.1 billion for its third quarter (fiscal 2025) earnings outcomes. The corporate’s third quarter earnings noticed a 1% decline in Q2 web gross sales to $1.1 billion, although natural gross sales grew 3%. Working revenue rose 1% to $341 million, and EPS elevated 9% to $0.55. For the primary half of fiscal 2025, web gross sales dropped 5% to $2 billion, working revenue fell 7% to $622 million, and EPS declined 3% to $0.96. CEO Lawson Whiting expects progress within the second half of the 12 months regardless of financial challenges.

Gross sales declines have been pushed by the divestitures of Finlandia and Sonoma-Cutrer, together with decrease volumes throughout key markets. Whiskey gross sales remained secure resulting from Woodford Reserve and Outdated Forester, however Tequila and ready-to-drink merchandise noticed declines. U.S. web gross sales fell 7% resulting from weaker Jack Daniel’s and Korbel gross sales, whereas worldwide and rising markets confirmed combined efficiency.

Gross revenue declined 8% resulting from excessive stock and value fluctuations, however decrease bills helped offset losses. Brown-Forman elevated its dividend for the forty first consecutive 12 months. The corporate expects 2%-4% natural progress in web gross sales and working revenue however stays cautious about financial and geopolitical dangers.

Supply: Investor Presentation

Progress Prospects

Brown-Forman has a powerful progress monitor document; the corporate even elevated its earnings-per-share over the past monetary disaster, as demand for alcohol shouldn’t be particularly cyclical. Historic earnings-per-share have been pushed by a mix of a number of elements, together with income progress, rising margins, and the influence of a declining share depend.

As a result of Brown-Forman owns robust manufacturers and is lively within the tremendous and ultra-premium alcoholic drinks markets, which see constant market progress, Brown-Forman ought to be capable to maintain its income progress going ahead.

This has been an necessary progress issue for Brown-Forman prior to now. Brown-Forman’s Jack Daniels model and its American super-premium whiskeys proceed to develop across the globe.

Increased general gross sales permit for margin will increase resulting from higher economies of scale, which makes the corporate extra environment friendly general, and positively impacts its web earnings progress fee.

As well as, Brown-Forman has aggressively repurchased shares prior to now decade, which provides some extra progress to its backside line. Going ahead, there’s loads of progress potential left as the corporate additional expands its product line inside and out of doors its flagship Jack Daniels model.

Moreover, the corporate will buy progress by acquisitions, for instance, its current buy of the Diplomático Rum model. This buy launched Brown-Forman into the rising super-premium+ rum class. Diplomático Rum is a super-premium rum from Venezuela and is distributed in over 100 international locations.

Supply: Investor Presentation

We’re forecasting 6% annual earnings-per-share progress over the subsequent 5 years.

Aggressive Benefits & Recession Efficiency

Brown-Forman has many aggressive benefits. Its well-known manufacturers yield vital pricing energy. Due to its world scale, it has a extremely worthwhile enterprise with low manufacturing and distribution prices. These qualities assist Brown-Forman generate constantly excessive returns on invested capital.

Brown-Forman can be very immune to recessions. That is typical amongst alcohol shares, as their merchandise are typically consumed in better quantity when financial occasions are robust. One may argue that alcohol producers carry out nicely throughout recessions.

Brown-Forman’s earnings-per-share by the Nice Recession are proven beneath:

2007 earnings-per-share of $0.76
2008 earnings-per-share of $0.77 (1.3% enhance)
2009 earnings-per-share of $0.82 (6.5% enhance)
2010 earnings-per-share of $0.95 (15.9% enhance)

As you’ll be able to see, the corporate grew its earnings per share yearly by the Nice Recession. This uncommon accomplishment demonstrates the corporate’s defensive enterprise mannequin.

Spirits producers resembling Brown-Forman are among the many most recession-resistant companies.

Valuation & Anticipated Returns

Based mostly on our estimate for 2025 earnings-per-share of $1.80 and a present share value close to $36, Brown-Forman shares are at present buying and selling at a P/E ratio 20.

It is a truthful a number of, even contemplating the energy of Brown-Forman’s enterprise. We estimate a good worth P/E ratio of twenty-two.

If shares have been to extend to 22 occasions earnings, this means the potential for a 1.5% valuation tailwind over the subsequent 5 years. On this foundation, the valuation seems truthful.

A robust earnings progress fee of 6% and a couple of.5% dividend yield will assist enhance shareholder returns. Total, we estimate annual returns of 10% over the subsequent 5 years.

Closing Ideas

Brown-Forman has a dominant place in its core product classes. Its flagship Jack Daniel’s model ought to proceed to guide the whiskey trade, with excessive progress from its smaller whiskey manufacturers and tequilas. Rising markets are additionally an interesting progress catalyst, and naturally, the dividend progress streak is enviable.

Brown-Forman is an effective instance of an amazing enterprise buying and selling at an exceptionally truthful valuation. The corporate has a strong dividend and really robust enterprise, the shares look significantly compelling for buy proper now.

Associated: My Prime 10 Purchase & Maintain Ceaselessly Shares.

Moreover, the next Certain Dividend databases include probably the most dependable dividend growers in our funding universe:

For those who’re on the lookout for shares with distinctive dividend traits, take into account the next Certain Dividend databases:

The most important home inventory market indices are one other strong useful resource for locating funding concepts. Certain Dividend compiles the next inventory market databases and updates them month-to-month: