Is Brown Forman Stock A Buy?

Is Brown Forman Stock A Buy? There is a long and colorful history of distilleries in the Tennessee and Kentucky areas. One of these companies has a history dating back to the Reconstruction era of the United States and that company is Brown Forman.

With such a long track record, is Brown Forman stock a buy?

Brown Forman 101

The Brown Forman Company had its start in Louisville, Kentucky in 1870 when George Garvin Brown started a company with his half-brother called J.T.S. Brown and Brothers. The company produced whisky in sealed glass bottles under the name “Kentucky Straight Bourbon Whisky” and experienced immediate success. 

After a few name changes in the early years, the original partnership between Brown and his half-brother was terminated. A new partner by the name of George Forman invested into the company and the Brown-Forman partnership was made.

Forman was already familiar with the business and its financial success as he was a friend of Brown’s over the years and was also his accountant.

1890 brought the official name change of the company to Brown-Forman and Company. Forman’s involvement with the company would sadly be a short one as he passed away in 1901. With Forman’s passing, Brown purchased his share in the company and the company was officially incorporated later on in the year.

Brown’s son (Owsley Brown) was brought into the company in 1904 and would become President of the company in 1917 with George Garvin Brown’s own passing. 1920 brought Prohibition into law and distilleries had to adapt to these changes as Brown-Forman continued producing whisky for medicinal purposes.  

1933 brought the end of Prohibition and the company celebrated this repeal by going public with an IPO in October of that year. 

World War II shifted the focus of the nation towards the war effort overseas with Brown-Forman producing Industrial Alcohol for that effort during the war years. 

1953 brought nationwide success to the company as Early Times (their first distillery acquisition back in 1923) was named the top-selling bourbon in the USA. 

Brown-Forman acquired the Jack Daniels Distillery in Tennessee and Jos. Garneau Co. Inc. in 1956. This acquisition would start a long history of acquiring other distilleries and companies over the next 60 years.

Today, Brown Forman sits atop a huge umbrella of recognizable distillery companies such as Jack Daniels, Southern Comfort, Canadian Mist, Korbel Champagne, and other companies.

Brown Forman Dividend Hike 

In November 2020, the Board of Directors in the company announced a 3% increase in quarterly cash dividends to its shareholders. Shareholders earned $0.1795 per share in quarterly dividends in common stock.

The amazing statistic here is that this was the 76th consecutive year that the company paid out a dividend to its shareholders. This also marked the 37th straight year of increases in the dividend payments.

These two stats alone showcase the long and steady growth of the company over the past centennial.

Other companies in the distillery sector have reported middling success over the past 12 months. The future seems uncertain due to the ongoing global pandemic with Brown Forman not providing quantitative guidance for shareholders for 2021.  

BF Revenues and Earnings

Throughout the market calamity of 2020, BF revenues and earnings stayed in the black. What’s obvious from an analysis of Brown Forman revenues and earnings is a very seasonal dip over the summer months and a spike in Winter months.

List Of Brown Forman Competitors

Diageo PLC (DEO): Leading producer of branded premium spirits. Brands include: Johnnie Walker, Smirnoff, Crown Royal Canadian, Captain Morgan, Tanqueray, Guinness stout, and others.

Eastside Distilling (EAST):  Craft spirits producer. Brands include: Portland Potato Vodka, Below Deck Rums, Burnside Bourbon, Barrel Hitch Whiskies

Constellation Brands (STZ, STZ.B): Largest multi-category alcohol supplier in the USA. Brands include: Corona. Modelo, Kim Crawford Wines, 7 Moons Wine, Ruffino Wines, and many others.

Willamette Valley Vineyards (WVVI): Ultra-premium vintner, Brands include: WVV, Griffin Creek, Pambrun, Tualatin Estate, Maison Bleue, Natoma, Metis, and Elton.

Is Brown Forman Stock A Buy?

Brown Forman has been part of the American landscape from the dying days of the Civil War up until the present day. This longevity in business is a rare sight indeed and on that fact alone, Brown Forman may deserve to be a part of your stock portfolio.

For income-oriented investors, Brown Forman has a strong history of paying out dividends and hiking them consecutively for years and even decades at a time.

With the glut of performance in the distillery market over the past few months, the outlook of the market is uncertain. This uncertainly ties in with the pandemic and its effects on the country and commerce. 

Brown Forman has showcased a very long history of slow and steady growth over time and long-term investors should not be put off by the certain climate. For those investors looking for a short-term swing, Brown Forman may not be for you to include in your portfolio. 

Brown Forman is a buy for 2021 for the long-term because of its long successful track record in the industry. The company should achieve a slow and steady growth throughout the year as they did in 2020.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.