Dividend Analysis of Anheuser-Busch

Anheuser-Busch Companies, Inc. (BUD), through its subsidiaries, engages in the production and distribution of beer. The company operates in four segments: Domestic Beer, International Beer, Packaging, and Entertainment.

In addition to being a dividend aristocrat, it is also a major component of the S&P 500 index. Over the past 10 years, this dividend growth stock has delivered an annual average total return of 12.40% to its shareholders. The company has managed to deliver an impressive 9.60% average annual increase in its EPS through organic growth and share buybacks. Management has consistently bought back 3% of outstanding shares each year for the past 10 years, spending a little over $12.5 billion in the process. Without the buybacks, the growth in EPS would have been 6.60% annually.

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The ROE has been increasing steadily over our study period, rising from a 27% in 1998 to 67% by 2007.

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Over the past 10 years, annual dividend payments have increased by an average of 9.6% annually, which matches the growth in EPS. A 10% growth in dividends translates into the dividend payment doubling every seven years. If we look at historical data, going as far back as 1983, BUD has actually managed to double its dividend payments every six years.

If we invested $100,000 in BUD on December 31, 1997 we would have bought 4545 shares (Adjusted for a 2:1 stock split in September 2000). Your first quarterly check would have been $590.85 in February 1998. If you kept reinvesting the dividends instead of spending them, your quarterly payment would have risen to $1799.16 by November 2007. For a period of 10 years, your quarterly dividend has increased by 154%, but if you had reinvested it, your quarterly dividend income would have increased by 204%.

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The dividend payout has remained below 50% over the past 10 years. This is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

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I think that BUD is attractively valued with its low price/earnings multiple of 16, and its above-average yield at 2.86%.

Disclosure: I do own shares in BUD.