I did my best to find every single aristocrat, but no one is perfect. Today I noticed that there is a Brown-Forman – awesome company with history of 31 years with rising dividends. What is company doing?
Well, probably most of you have ever tried Jack Daniels. How about Finlandia Vodka? Then maybe Sonoma wines?
Those and many more are owned by Brown-Forman, US company founded in 1870.
Currently company is generating more than 95% of sales from premium spirits. Rest of sales is generated in wines.
Company is highly diversified having around 43% of sales in US, 38% in Non-US Developed markets and 19% in Emerging Markets.
Strong brands + geographical diversification = safe company. Also consider, that when times are tough people can afford whiskey. I mean that in case of crisis people will resign from buying a new car, but drinking is still a relatively cheap luxury. Look at long term performance – average total return for the last 30 years is more than 16% annually!
On the other hand there is a trend of healthy lifestyle. Well even though during weekend it happens to drink alcohol J
How about valuation?
Well, times are good on stock exchange so stable companies should be traded on very high multiples. This is true for BF-B.
Company is traded at next year multiples:
EV/EBITDA = 14
P/E = 24
Dividend yield = 1.6% (rather low)
Also share price at $45 is after a huge rally from around $20 (split adjusted) at 2010. Current drawdown of 15% from around $53 is nothing special when broader perspective is taken into account.
Summing up, Brown-Forman is an awesome business but by now it is too expensive for me. If shares drop to around $35, which is around 10 times EBITDA then I will think about buying.
Disclaimer: BF-B no position