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Should You Buy Constellation Brands And Its 1.3% Dividend?

Over the last couple months, I’ve shown you stocks to avoid…

Stocks to consider buying…

And some of the best stocks related to the coming Internet of Things…  Which you can find linked further below.

All these recommendations are to help you either avoid pain and terrible stocks.  Or to help you find potentially great stocks to invest in during this pandemic.

If you do both well, it helps you earn higher than average investment returns and build wealth.

Because the fewer investment losses you have the more capital you keep. And the more capital you keep the faster you compound your money.

To help you figure this out, today I answer the question – Should You Buy Constellation Brands And Its 1.3% Dividend?

Constellation Brands (STZ) is the largest alcohol supplier in the United States.  And it also owns 37% of cannabis company Canopy Growth.

Its based in Victor New York.  It has a $45 billion market cap. And it pays a 1.3% dividend… Which is reason #1 to consider buying its stock.

Constellation Brands 1.3% Dividend

Since 2016 when it began paying a dividend, Constellation’s paid out a total of $10.88 per share in dividends.

At today’s share count of 205 million shares that’s equal to $380.8 million paid out to shareholders in that time.

It also grew its dividend 141% from $1.24 per share in 2016 to $3.00 per share now.  This is an annual dividend growth rate on average of 14.1% per year.

These dividend payments will help you in normal times earn cash if you take the money out.  Or allow you to buy more shares over time if you reinvest the dividends.

These regular payments will help you earn more money for your retirement.  And the solid, stable, and growing dividends will help in any kind of prolonged economic issues like we’re dealing with today.

It can do this because it earns large profits.  Which is reason #2 to consider buying Constellation Brands stock.

Constellation Earns Large Profits

Over the last decade it earned an average operating income margin of 18.9% per year.  And in 2020 it earned 30.3% operating profit margins.

I look for anything above 10%. 

Another way to show this is with its free cash flow to sales ratio (FCF/Sales). Over the last decade its 14.8% per year on average.  And in 2020 it earned a FCF/Sales margin of 21.9%.

I call this the “Cash Machine” metric.

I look for anything above 5% on a consistent basis for the same reasons as I look for high operating profit margins above.  If a company surpasses both thresholds it makes it a great operating business that is safe and potentially valuable.

And Constellation earns far higher margins than my minimum thresholds.

These profits also allow Constellation to have decent debt numbers as well.

Constellation Brands Debt Is Lower Than I Require

As of this writing it has $200 million in cash compared to $11.6 billion in debt.

As a percentage of its balance sheet total liabilities make up 55.3%.

And its debt-to-equity ratio is 0.99.

These are all below my normal thresholds for what I look for in an investment, which adds a margin of safety to potentially investing in Constellation Brands stock.

But what about its valuation?  Is it cheap? 

Constellation IS NOT Cheap

With the markets at or near all-time highs you’d expect a good stock like Constellation Brands to be selling at an enormous valuation.

Unfortunately, it is.

As of this writing its P/E is 39.1.

Its P/CF is 17.8.

Its forward P/E is 21.5.

And its enterprise value to operating income – EV/EBIT is 46.

On all three metrics at the top, I look to buy investments below 20 to consider them undervalued.

And on EV/EBIT I look to buy stocks below 8.

Constellation is massively overvalued right now.

And this means owning its stock gives you no margin of safety in investing terminology.

When you invest in stocks that have a margin of safety it makes the investment safer.  And it also means you should expect to earn higher returns owning it in the coming years.

The inverse of this is also true…

When you invest in a stock without a margin of safety it makes the investment riskier.  And it also means you should expect to earn less owning it going forward.

With Constellation’s enormous valuation, this makes it riskier.  Even with the other wonderful things above.


If you’re looking for a solid, safe, dividend paying, stable, and enormously profitable investment to buy – consider investing in Constellation Brands. But only when its cheaper.

Until then, use the following links to some of our recent articles to learn other ways to protect yourself and your investments in these uncertain times.

Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above

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