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10 Best Beer Stocks to Buy in 2022

Daniel Rogers

Sep 21, 2022 16:14

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Beer stocks, like other beverage equities, are available in various forms. Companies in the beer industry provide direct exposure through the production and sale of beer, while companies in neighboring industries provide indirect exposure through ownership investments in beer companies.


Beer is a lucrative industry for long-term income investors. The majority of beer companies' profits are distributed to shareholders as dividends.


This article will analyze the top ten beer stocks, each of which provides investors with substantial competitive advantages and decent long-term growth potential. Consequently, they may fit well in the diversified long-term dividend growth portfolios that Top1 Markets aims to assist investors in constructing.

An Overview of Beer

Beer is one of the world's oldest and most popular alcoholic beverages and the third most common beverage overall after water and tea. Beer is produced from cereal grains, primarily malted barley, wheat, maize (corn), and rice. During the brewing process, the starch sugars in the wort are fermented to produce ethanol and carbonation in the beer. Hops, which impart bitterness and other flavors and act as a natural preservative and stabilizing agent, are used to brew the vast majority of contemporary beers. In place of hops, other flavoring agents such as gruit, herbs, or fruits may be added or employed. The natural carbonation effect is often supplanted by forced carbonation in industrial brewing.


The Code of Hammurabi featured laws controlling beer and beer parlors, and a hymn to the Mesopotamian goddess of beer, Ninkasi, known as "The Hymn to Ninkasi," served as both a prayer and a mechanism to remember the formula for beer in a culture where few people could read or write.


Beer can be bought in cans, bottles, and on tap at bars and taverns. There are a handful of mega-corporations dominating the brewing sector, but many more brewpubs and regional brewers make up the rest of the industry. The alcohol by volume (ABV) content of modern beer is typically between 4% and 6% but can range from 0.5% to 20%, with some breweries producing beers with 40% ABV or more. Beer is a component of the culture of many countries and is related to social customs such as beer festivals and a thriving pub culture that includes activities such as bar crawling and pub games.

Top 10 Beer Stocks to Buy Now

1. A.B. InBev 

AB InBev is by far the most extensive beer corporation in the world. It controls hundreds of beer brands in the United States, including Budweiser, Stella Artois, Beck's, Leffe, and various acquired craft brewers. The corporation is the result of the 2008 merger between American brewer Anheuser-Busch and Belgian-Brazilian brewer InBev, as well as the 2016 purchase of South African brewing giant SABMiller.


The mega-beer experiment began well, but quick shifts in consumer preferences and sluggish growth of notable beer brands have harmed A.B. InBev stockholders in recent years. Since the establishment of the new organization in 2008, shares have only increased approximately 50%, compared to the S&P 500's 380% increase.


Nonetheless, since the market slammed the reset button on A.B. InBev (shares are down about 30% since the beginning of 2020), the company's price has traded more like a value stock, reflecting modest but steady sales, constant profitability, and a little dividend for income-seeking investors. Even though the mega-beer merger is not proceeding as expected, there are more excellent beer investments than A.B. InBev.

2. Constellation Brands (STZ)

Constellation Brands, has been around since 1945 and has developed to become a global giant in the alcoholic beverage industry by creating and distributing more than 100 different beer, wine, and spirit brands, such as Corona, Modelo Especial, Modelo Negra, Funky Buddha Brewery, Robert Mondavi, Pacifico, Ballast Point, Clos du Bois, Black Box, SVEDKA Vodka, Kim Crawford, Mark West, Casa Noble Tequila, and High West Whiskey. Additionally, the company holds an interest in Canopy Growth (CGC).


On April 7, 2022, Constellation Brands released its fourth quarter and fiscal year 2022 results on February 28. (The fiscal year of Constellation Brands concludes on the last day of February.) The corporation earned $8.8 billion in net revenues for the fiscal year, a 2% increase compared to the fiscal year 2021. This result was led by an 11% gain in beer sales year-over-year, which was somewhat offset by a 19% fall in wine and spirits sales.


Adjusted earnings per share increased to $10.20 from $9.97 in 2021. Constellation Brands also provided its outlook for fiscal 2023, and the company estimates adjusted EPS between $11.20 and $11.50. In addition, beer sales are forecast to climb between 7% and 9%, while wine and spirit sales are anticipated to decline between -1% and -3%.


Despite its apparent benefits, Constellation Brands faces certain dangers. These include its considerable reliance on Mexican Beer (which accounts for more than two-thirds of its operating income), its ongoing and rising competition from powerful rivals, and its substantial interest in Canopy Growth.


Constellation Brands stock has a price-to-earnings ratio of 21.0, which is higher than our fair value P/E of 19. A decreasing value multiple could diminish annual returns. We expect Constellation Brands to produce 5.1% total returns over the next five years due to valuation headwinds, 5.5% annual EPS growth, and a dividend yield of 1.4%. 

3. Molson Coors

One such beer stock that could be a good investment is Molson Coors. In the past three years, the parent holding company for Coors, Miller, Blue Moon, and dozens of other beer labels has battled with stagnant sales as North American consumers have increasingly preferred craft beer and other alcoholic beverages.


Molson Coors is the fifth-largest beer in the world, but its stock has decreased significantly over the past decade. The stock market has been on an upswing as of late, but it is still 50% behind its 2016 peak.


To better fit the brand portfolio with modern customer preferences, the focus has switched to premium beers and fashionable beverages such as effervescent hard seltzer (the premium side of the business). In addition, Molson Coors resumed dividend payments following a temporary suspension at the onset of the COVID-19 epidemic. The stock could be an excellent addition to the portfolios of investors seeking income. 

4. Diageo (DEO)

Diageo is one of the oldest and largest producers of alcoholic beverages; and it dates back to the 17th century and currently owns 20 of the top 100 liquor brands in the world. Diageo manufactures numerous well-known liquor and beer brands, including Johnnie Walker, Smirnoff, Captain Morgan, Baileys, Tanqueray, Guinness, Crown Royal, and Ketel One.


On January 27, 2022, Diageo announced its earnings for the first half of the fiscal year 2022. The increase in net sales was 15.9%, and organic growth was 20%. As the company exited a difficult phase due to the COVID-19 epidemic, its organic volumes increased by 9.3%. Each area experienced organic sales growth of at least 13%, topped by a 45% increase in Latin America and a 27% increase in Europe.


More than eighty percent of the portfolio maintained or increased market share. The organic growth of super premium and premium brands was 31% and 27%, respectively. The organic sales growth for Tanqueray, Crown Royal, Johnnie Walker, Guinness, and Don Julio was 4%, 5%, 7%, 10%, and 41%, respectively. Baileys was down 10%, and Smirnoff was down 4%. In 2022, analysts anticipate Diageo to earn $7.69 per share.


We anticipate 8% annual earnings growth through 2025, comprised of organic sales growth in the mid-single digits, margin expansion, and a restart of share repurchases.


Like its competitors, Diageo's robust growth is fueled by its brand strength and competitive advantages in terms of lower costs. With three of the top ten, thirteen of the top fifty, and twenty of the total one hundred premium distilled spirits brands in the globe. The company was able to raise prices, profit margins, and return on investment thanks to the loyalty of its existing client base and the expansion of its consumer base.


In addition, the company's vast global volume provides them with significant pricing power with suppliers and improved economies of scale in manufacturing and distribution, hence reducing costs and enhancing profits and economies of scale.


In addition to the common geopolitical, economic, and foreign exchange risks shared by all global producers of alcoholic beverages, Brexit offers a specific threat to Diageo. Given that its headquarters and most of its products are produced in Scotland, any tariff rises with the European Union could harm the company's competitiveness and profitability in one of its primary markets.


Diageo distributes a semi-annual dividend that is regularly increased. The stock yields 1.7% in rewards.


The current price-to-earnings ratio for Diageo shares is 23,9, somewhat over our prediction of 20. Consequently, a decreasing P/E percentage suggests negative returns.


We anticipate that the company will provide 6.5% annualized total returns over the next five years due to 8% EPS growth, a 1.7% dividend yield, and -3.2% annual returns from a decreasing P/E ratio. Dividend recommends holding Diageo, but we believe the other stocks on this list provide a more significant total return potential.

5. Kirin Holdings

Kirin is the second-biggest beer brand in Japan, just behind Asahi Group Holdings (OTC: ASBRF), and it is one of the country's foremost consumer staples corporations. However, Kirin is not a growth company, and sales have been static for years. So why should one invest in Kirin Holdings? In the wake of the epidemic, profitability (as measured by free cash flow) is making a comeback, which helps to support this top dividend-paying beer investment.


Kirin also has a health science group, which leverages its beverage production capabilities to develop a healthy food and beverage company. Applied health research in food and drink could be a lucrative sector for Kirin since people worldwide are increasingly concerned with their health and well-being and focused on eating healthier. This little section will not immediately reignite growth for Japan's second-largest beer, but it provides Kirin with a new region to sow the seeds of future success. In addition, Kirin is implementing digital updates to modernize its operations and boost efficiency, strengthening the company's ability to pay dividends. 

6. Boston Beer Company

Boston Beer, which owns the Samuel Adams beer label, Truly Hard Seltzer, Angry Orchard hard cider, and a number of other small regional brewers, has been a significant advocate for the craft beer industry for many years. Although Boston Beer is no longer a small business, it still accounts for a fraction of North American beer consumption.


The pandemic caused a significant increase in alcohol usage at home. As a result, Boston Beer's sales growth accelerated in 2020 and at the beginning of 2021. However, ever-changing consumer habits have generated specific difficulties, such as a lower-than-expected demand for spiked seltzer products beginning in the summer of 2021. However, consistent double-digit sales growth is remarkable in an industry primarily governed by slow and predictable consumption trends.


Boston Beer is also debt-free, which is uncommon among the world's largest beer businesses. Therefore, this is an outstanding growth stock in alcohol investment. Due to the slowdown in sparkling seltzer sales growth, shares are down more than 70% from their all-time highs, but the Samuel Adams parent company will be more than acceptable in the long run.

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7. Altria Group (MO)

Philip Morris created Altria Group in 1847 and has since developed into a global leader in consumer necessities. While it is best known for its tobacco goods, it has a considerable presence in beer due to its 10% holding in Anheuser-Busch InBev. Over 40% of the retail market in the United States is still owned by the flagship brand Marlboro.


In addition to having a 10% ownership share in global beer giant Anheuser-Busch InBev, Altria also holds substantial stakes in vaping goods producer and distributor Juul and cannabis company Cronos Group (CRON).


On 04/28/22, Altria published first quarter FY22 earnings. Adjusted diluted profits per share rose 4.7% year-over-year to $1.12. The sale of the wine company in October 2021 led to a 2.4% decline in net revenue, which totaled $5.9 billion. The reported diluted earnings per share increased by 40.3% annually to $1.08, and annual revenue declined by 1.2% to $4.82 billion.


Altria disclosed around $1.2 billion remaining under the company's existing $3.5 billion share repurchase program, which will conclude on December 31, 2022. The company also confirmed its adjusted diluted earnings per share outlook for 2022 at $4.79 to $4.93.


The long-term outlook for cigarette producers like Altria is uncertain, so the business has made substantial investments in neighboring industries to fuel its future growth.


The company recently bought an 80% ownership position in Switzerland-based Burger Sohne Group for its own! Oral nicotine pouch brand. These investments may give Altria much-needed growth as the cigarette industry continues to fall.


Despite these risks, we view Altria positively due mainly to the company's outstanding dividend track record and high yield. Altria has grown its Dividend for almost fifty years, placing it among the Dividend Kings.


Due to its investment in BUD, it is not only one of the most attractive stocks in the tobacco industry but also one of the most attractive stocks in the beer industry.


We anticipate that Altria's adjusted EPS will increase by around 1.2% per year over the next five years. In addition to the 7.0% dividend yield (assuming a constant P/E multiple), annual gains of 8.2% are anticipated over the next five years.

8. Craft Brew Alliance (NASDAQ: BREW)

As previously said, the popularity of craft beers has risen in recent years. Due to the difficulty small breweries have in bringing their products to market, an Oregon-based company was founded to assist. They were presenting the Craft Brew Alliance.


Red Hook, Widmer Brothers, Square Mile Cider Company, and Kona are four of their most well-known brands. The Kona brand is by far the most popular of its products, appearing as draft options in pubs and taverns worldwide.


The problem with Craft Brew Alliance is that the craft beer business is exhibiting signs of deceleration. As a result, the company's earnings have not been exceptional. Earnings per share came in at -$0.03, $0.04 short of expectations. Revenues of $49.33 million fell short of projections by $2.55 million, representing a 4% reduction.


In contrast to Craft Brew Alliance, Boston Beer is a hazardous investment in beer stocks. They have some time to figure out how to revitalize the firm because its Kona brand is strong and gaining in popularity. Even though there is no assurance that they will be able to accomplish this, if they are successful, investors in the company can anticipate healthy profits.

9. Heineken N.V.

Heineken, a Dutch brewing corporation founded in 1864, operates more than 165 breweries in over 70 countries and produces 250 distinct beers and ciders, including Heineken, Amstel, Red Stripe, Bulmers, and Strongbow. This impressive array of brands earned Heineken a spot on our list.


HEIA's share price has been quite fluctuating over the past five years, but since March 2020, it has witnessed a tremendous price increase. It is valued at over €50 billion and generates over $20 billion in annual revenue. Additionally, the corporation offers above-average dividends for the beer industry.


As an integral partner of the UEFA Champions League and several other major sporting tournaments, Heineken has firmly established itself as a globally popular beer among sports fans and pub visitors. We would not be shocked if Heineken, which has over 70,000 people, expanded operations in the following years. 

10. Crown Holdings (CCK)

Crown Holdings (CCK), in Pennsylvania, manufactures steel and aluminum cans and metal caps for the food and beverage, household, and consumer goods industries. The company's market capitalization is almost $11.5 billion.


As with Ball, the current appeal of Crown is that its exposure to increasing beverages can increase sales. More behind the scenes regarding new projects, operational changes, and other activities should maintain modest growth and boost margins. However, for our purposes, it's all about the cans.


To emphasize this point, Crown Holdings recently sold off a substantial portion of its non-beverage-related company. The European Tinplate business, which generated $2.3 billion in 2020 (21 percent of total sales), was recently sold for $2.3 billion to KPS Capital Partners. This will allow Crown to pay down debt, return money to shareholders, and invest in more growth-oriented aspects of the firm (i.e., beverage cans).


Even though production capacity has been restrained recently, growth should surge in 2022 as these restraints disappear. Coupled with an increase in customer orders (management stated that global beverage could volume should increase by just above 10 percent), the opening of a new plant in the southwestern United States in 2023 (another just opened in Kentucky), and "no shortage" of new beverage product ideas, the outlook for the next two years is quite optimistic.


Turning to the facts, following a 6% decline in sales in 2020, revenues are back in the black; management predicts minimal earnings growth this year due to the challenging environment, with double-digit growth rates commencing in 2023. Meanwhile, the stock has outperformed its rivals by a large margin this year, declining 15% compared to a sector fall of over 30%. 

Final Thoughts

Numerous competitors in the beer sector have worldwide diversification and substantial competitive advantages, and each offers investors a distinctive perspective on the market. Others, such as Molson Coors in the U.S. market and Ambev in Latin America, concentrate on specific geographies. In contrast, Altria indirectly exposes the beer business through its holding in A.B. InBev.


Companies that engage in the beer industry have the potential to endure even the most severe recessions due to their robust profit margins. The annual demand for beer should remain stable, and the most extensive beer stocks enjoy significant profit margins due to their capacity to boost prices over time.


These ten best beer stocks have favorable growth prospects and pay substantial dividends to shareholders. Risk-averse income investors seeking reliable dividend payouts should examine beer stocks more closely in uncertain economic circumstances.