For long term investing, there is nothing better than buying blue chips like Anheuser-Busch (NYSE: BUD) on the dips.
A recent article on this site, “Drink Up Beverage Stocks for the Long Term,” detailed why it was so compelling now for Coca-Cola (NYSE: KO) and PepsiCo (NYSE: PEP). There are many intriguing elements for long term investors in PepsiCo and Coca-Cola. That is also true for Anheuser-Busch, the dominant force in its field, much like Coca-Cola and PepsiCo. Overall, Anheuser-Busch produces more than 200 beer labels that are served and enjoyed around the globe!
In a low interest rate world, high yield investments are especially attractive.
Like Coca-Cola and PepsiCo, that is an alluring feature of Anheuser-Busch for income investors. At present, the average dividend yield for a member of the Standard & Poor’s 500 Index (NYSE: SPY) is around 1.8 percent. With a dividend yield of more than 3.6 percent, Anheuser-Busch easily tops that. The dividend income stream from Anheuser-Busch is also higher than that for Coca-Cola and PepsiCo, too. Like PepsiCo and Coca-Cola, Anheuser-Busch has a history in increasing the amount of the dividend which results in raises for long term investors!
The return-on-equity is also high for Anheuser-Busch.
Legendary investor Warren Buffett favors companies with a return-on-equity of over 20 percent. The return-on-equity for Anheuser-Busch is over 30 percent. A fifty percent premium higher than what “The Oracle of Omaha” is looking for is always appealing to a long term investor.
Best of all, there is the opportunity to buy at a discount.
Anheuser-Busch is down for the last week and month of market action (chart below). That results in several very appealing situations for long term investors. First, the share price is lower. That obviously makes the upside higher. It also makes the dividend yield higher, too: it is pretty basic here, when the share price falls, the dividend yield is higher!
This is an unbeatable combination for a blue chip like Anheuser-Busch!