Buy Constellation Brands for Its Strong Brands and Dividend Growth

GuruFocus.com - finance.yahoo.com Posted 5 years ago

- By Ben Reynolds

Consumers are often willing to pay more for the brands they know and trust, giving companies that have well-known brands pricing power. Better pricing power often leads to better financial performance, which in turn can lead to higher share prices.

Companies in the alcohol sector with well-known brands often offer attractive returns. One of our favorites among alcohol stocks is Constellation Brands Inc. (STZ) because of its strong brands and dividend growth.

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  • announced on April 3 that it would be selling approximately 30 brands from its wine and spirits portfolio to E. & J. Gallo Winery. The deal will net the company $1.7 billion, which it will use to pay down debt. The wine and spirits brands being sold include Clos du Bois, Black Box and Mark West. These brands are priced at $11 retail and under. This divestiture will give Constellation Brands a cash infusion while allowing it to focus on its premium wine and spirits brands.