The merger of SAB Miller and Anheuser-Busch InBev (ABInBev) in October 2016 was the third largest merger in history. As a result, ABInBev became the world’s largest brewer selling beer in 150 countries. This blog outlines our investment decisions to buy ABInBev.
ABInBev’s global business enables them to sell different types of beers, to different consumer segments at different price points meaning they are impacted less by the political or economic situation in any one country.
Beer is the most consumed alcoholic beverage in the world and 30% of all beer is sold by ABInBev. That’s one in every three beers! ABInBev owns global brands Budweiser, Corona and Stella Artois as well as 500 other regional and local beer brands (like Castle Lager). These strong brands allow them to charge premium prices by leveraging brand loyalty.
Buy when Prices are Low & be Patient with a Long-Term View
Investment Income is more important than Share price growth
ABInBev is committed to paying dividends and has the free cash flow to support that commitment. The dividend growth has slowed recently because cash is being utilised to pay down debt. The current low share price allows us to accumulate more shares, which means more dividends in the future, because the dividends do not decline with the share price.
Don’t Lose Money
To avoid permanent loss of capital, we continuously analyse our investments to ensure the brands and cash flow remain strong while debt remains manageable.
ABInBev has a debt to equity ratio of 1.83. ABInBev generates USD 21.7 Bn from its operating activities and has an interest payment of USD 6 Bn. Its annual Capex is around USD 4.2 Bn. This means that ABInBev has almost three times interest cover. These two statistics show that ABInBev is unlikely to disappear as a result of its debt and is able to pay dividends for the foreseeable future.
At AXIAM, we have spent many years growing wealth inspired by the wisdom of successful investors. We buy shares in companies like ABInBev, that pay regular, increasing dividends, that own great brands that are known used around the world daily. Our intention is to hold, and ideally never sell, the assets we buy. To learn more about our investment philosophy, sign up for our newsletter, or contact our fund management team to invest.