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Anheuser-Busch's Dividend Gets Decimated: What Investors Need To Know

Published Wed, 15 Apr 2020 17:58:12 -0400 on Seeking Alpha

Anheuser-Busch has cut its dividend once more.
The beer industry has a favorable long-term outlook and is resilient during recessions.
Shares are inexpensive, and investors could see ample share price gains in the long run.
Article Thesis
Anheuser-Busch InBev (BUD), one of the largest beer companies in the world, just announced that it would cut its dividend in half. For income investors that rely on the dividends that will be a hit, but it makes sense for the company to cut its payout now, as this frees up a lot of cash that can be used for bringing down debt levels.
In the long run, Anheuser-Busch should eventually benefit from the growth in global beer sales, while it is also likely that the hit to its revenues and earnings during the current crisis will not be too large, as alcohol is a quite recession-resistant business. Due to the high volatility in Anheuser-Busch's shares, selling covered calls could be an opportune way for investors to generate additional income from their investment to balance out the dividend cut.
Source: Seeking Alpha's image bank
What Happened?
Anheuser-Busch has announced that it will cut its final dividend payment for 2019 by 50%, from €1.00 per share to €0.50 per share. The new dividend amount equates to around $0.55 on a per-share basis once translated to USD.
Management's explanation is the following one:
"Given the uncertainty, volatility and continued impact of the COVID-19 pandemic, AB InBev has determined that it would be prudent and in the best interests of the Company to reduce the amount of the final 2019 dividend. This decision is consistent with the Company's financial discipline, deleveraging commitments and other actions taken to navigate this environment."
We can summarize this as management being conservative and deciding to focus on debt reduction and keeping ample liquidity at the company during these troubled times. That makes sense from management's standpoint, as the company's... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
MOLSON COORS BREWING 56.25   13.6 4.13 2.28 4.03
COMPANHIA DE BEBIDAS (AMBEV) 4.79   25.2 0.19 0.08 1.80


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