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Wow! Three weeks ago, one of my recommended companies announced it was being acquired — at a nice premium — by Mars (with help from Warren Buffett).
Now, another of my favorite consumer staples is reportedly up for grabs, too!
I’m talking about Anheuser-Busch (BUD), which I first recommended in the exact same report that profiled Wrigley.
Last Friday, the Financial Times reported that InBev SA, the giant Belgian brewer, is working on a $46-billion takeover bid for BUD.
The shares rose to a new all-time high of $58 shortly after the news hit the wires. So if you already own BUD stock, you might want to crack open a cold one and celebrate!
And even if you don’t yet own the stock, a $46-billion buyout implies an acquisition price of $65 a share. That represents another 14.8% gain from BUD’s closing price before the Memorial Day holiday. Should this deal end up happening, even new investors stand to reap plenty of profits.
Rumors of a Bud takeover have circulated before, and I always take this kind of speculation with a grain of salt. But this potential acquisition of yet another great dividend payer proves many of the things I’ve been telling you about.
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| Can a takeover of Bud quench InBev CEO Carlos Brito’s thirst? |
First and foremost …
Firms with Big Brands Belong
In Your Core Stock Portfolio
It’s no surprise why everyone is after major U.S. companies like Wrigley and Anheuser-Busch. These companies benefit from steady demand and will always remain in style.
Wrigley makes chewing gum. Bud makes beer. Some of my other recommended dividend payers make soap, cigarettes and ice cream.
In short, they sell the kind of items we buy no matter what. Their products are either necessities or, at worst, very affordable luxuries.
I know the other side’s argument — “These firms have already seen their best growth in the States … they were last Century’s story.”
No doubt many of these businesses are fairly mature here in the States. But is that a bad thing? No way! That’s why they’re able to send out dividends in a predictable fashion.
More important, I think nearly all of them will be dynamic growth stories in this century, too.
Reason: They’re going to benefit from tremendous foreign demand.
Sure, the Industrial Revolution has already played out here in the U.S. But what kind of cigarettes are Chinese citizens smoking? What toothpaste are Indians buying? What kind of tractors are Brazilian farmers driving?
Answer: The very same brands which remain popular here.
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And even in the rare cases where local brands have taken root, well, the big U.S. companies will eventually just come in and snap them up.
Anheuser-Busch is a perfect example. Just look what it’s done in China, the world’s largest beer market:
- The company has a 97% equity interest in the Budweiser Wuhan International Brewing Company, in Wuhan, China …
- It owns Harbin Brewery, the fourth-largest brewer in China …
- And it has a 27% stake in Tsingtao Brewery Company Ltd.
No wonder a company like InBev would rather just pay up and buy BUD lock, stock, and barrel!
In Addition, Dividend Stocks Will Pay You to Wait …
While I’m elated by the fact that two of my recommended companies are the subject of takeover news, there’s no way to know what the market or any single investment is going to do tomorrow. You certainly can’t count on every single stock getting bought out in short order!
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| Anheuser-Busch boasts a massive presence in China, the world’s largest beer market. |
But even if your dividend-paying shares sit idle for a while, you should still be receiving nice checks in the mail. Yet again, Bud is the perfect example.
Even near all-time highs, the stock is shelling out a dividend worth 2.5% a year. That’s more than most CDs and money markets are paying right now.
In fact, according to Bankrate.com’s May 21 survey of banks and thirfts, the national average for a one-year CD was just 2.11% and money markets were paying a paltry 0.73%.
Equally important is the fact that Bud has paid — and increased — its dividend for 31 years in a row!
Heck, maybe we should start calling Anheuser-Busch the King of Dividends! Last year’s dividend hike was a very healthy 11.3%, and that’s about average for Bud.
Remember, when a stock’s dividend rises year in and year out, you not only get paid healthy, non-refundable returns, but your yield-on-cost (the dividend divided by the price you originally paid) goes up, up, up.
How can anyone say — with a straight face — that dividend stocks are boring? In the case of Bud, an annual dividend hike of 11.3% would double your effective yield in just seven years and nearly triple it within a decade!
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When you’re getting annual returns like that, you can afford to sit around and wait for the capital gains to come later.
And as I’ve said before, being invested at all times means you’re right there should terrific takeover news hit the wires! No complicated timing strategies, educated guesses, or sleepless nights.
So I suggest you let dividend-paying stocks do the heavy lifting in your portfolio. That leaves you plenty more time to sit back, relax, and enjoy a few cold ones.
Best wishes,
Nilus
About Money and Markets
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Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Tony Sagami, Nilus Mattive, Sean Brodrick, Larry Edelson, Michael Larson and Jack Crooks. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates
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