Dividend Aristocrat Overview: The Brown-Forman Corporation

About The Brown-Forman Corporation

Southern Comfort and Jack Daniels are two of Brown-Forman's brands that have powered the company to dividend growth since 1985. Photo courtesy Jeff Golden/flickr.com.

Southern Comfort and Jack Daniels are two of Brown-Forman’s brands that have powered the company to dividend growth since 1985.
Photo courtesy Jeff Golden/flickr.com.

The Brown-Forman Corporation manufactures and sells over 25 brands of liquor, wines and spirits including Jack Daniel’s Tennessee Whiskey, Southern Comfort, Canadian Mist Whisky, el Jimador Tequila, and Finlandia Vodka to customers in over 135 countries. Brown-Forman has 4,000 employees.

Brown-Forman, which has headquarters in Louisville, KY, has a history dating back to 1870 when George Garvin Brown founded a company to market whiskey in glass bottles under the brand name Old Forester as opposed to being sold by the barrel. In 1890, the company changed its name to Brown-Forman and Company, after George Brown and his accountant and partner George Forman. In the early 20th century, the company was able to survive the start of Prohibition in 1920 by being one of only a few companies to receive a license from the U.S. Government to bottle whiskey for medicinal purposes. The company’s first acquisition was during Prohibition, in 1923, when Early Times was purchased for its whiskey inventory. In 1933, Prohibition ended and the company issued its first public stock. Brown-Forman continued to manufacture whiskey for sale in the U.S. until World War II. During the war, Brown-Forman produced industrial alcohol for the war effort; the company returned to liquor and spirit production after the war.

The company has grown extensively in the ensuing years through organic growth and acquisitions. Among the better known acquisitions are Brown-Forman’s acquisition of the Jack Daniel Distillery in Lynchburg, TN in 1956 and of Southern Comfort in 1979. The company also acquired Lenox, Inc. in 1983, purchasing the Lenox China, Crystal and Giftware lines and Hartmann luggage lines. (The company sold Hartmann luggage in 2007.)  Standard & Poor’s named Brown-Forman a Dividend Aristocrat in November 2009.

In the 2014 fiscal year (which ended April 30th, 2014), Brown-Forman recorded $659 million in net income, up 11.5% from 2013. The company increased revenues from the 2013 to 2014 fiscal years by 4.3%, to $3.945 billion.

Brown-Forman is a member of the S&P 500 index and the “B” class shares (which are available to non-family members but have no voting rights) trade under the ticker symbol BF-B. You may also find the stock ticker listed as “BF.B” or “BF/B”, depending on the stock quote service.

Brown-Forman’s Dividend and Stock Split History

Brown-Forman has increased dividends since 1985 and was declared a Dividend Aristocrat by S&P in November 2009. The company makes regular dividend payments at the beginning of April, July and October and at the end of December; the dividend increase traditionally has occurred in the December payment. In December 2013, Brown-Forman increased its quarterly dividend by 13.7%, from 25.5 cents to 29 cents per share.

Brown-Forman's record of dividend growth has been consistent since 1985, with compounded growth in the 8 - 9% range.

Brown-Forman’s record of dividend growth has been consistent since 1985, with average compounded growth in the range of 8 – 9% per year.

Brown-Forman has a good and fairly consistent record of dividend increases over the short and long-term. The company’s 5-year compounded annual dividend growth rate (CADGR) is 8.63% while the 10-year CADGR is 9.85%. Longer term, Brown-Forman’s dividend growth rate is similar, with 20- and 25-year CADGRs of 7.92% and 8.55%.

Brown-Forman has split its stock 9 times since 1964. Most recently, the company split the stock 3-for-2 in July 2012; prior to that, Brown-Forman split its stock 5-for-4 in September 2008. Other stock splits occurred in November 2003 (2-for-1), May 1994 (3-for-1), March 1987 (3-for-2), July 1981 (2-for-1), August 1975 and August 1976 (3% stock dividend each time), and February 1964 (3-for-2).

From mid-2009 to mid-2014, Brown-Forman stock appreciated from $24.50 to $94.50, resulting in an annualized rate of nearly 31%. This significantly outpaced the 14.3% annualized return of the S&P 500 during the same time. These returns do not include the effect of reinvesting dividends.

Direct Purchase and Dividend Reinvestment Plans

Brown-Forman has both direct purchase and dividend reinvestment plans. The plans are only open to existing shareholders of Brown-Forman stock. What this means is that if you do not currently own any Brown-Forman stock, you have to buy at least one share through a broker and then have the shares transferred into your own name. (When you own shares through a broker, from the company’s perspective the broker is the registered shareholder. The broker then keeps track of the various company stock that you own.) Investors interested in participating in either of these plans can find information at ComputerShare’s Investment Plan site. If you’re interested in directly purchasing Brown-Forman stock, the minimum purchase is $50 whether investing by check or by automatic debit.

The plans have both purchase and sales fees. There is no fee to set up a direct purchase or dividend reinvestment plan but when buying Brown-Forman stock, you’ll pay a fee of either $5 (for a single purchase) or $2.50 (for an ongoing automatic purchase) plus a commission of 5 cents per share. When you reinvest your dividends, you’ll pay a fee of 5% of the reinvested amount up to $3, plus 5 cents per share purchased. These fees are deducted from the purchase amount.

When you go to sell your shares, you’ll pay a fee of $15 for a batch order or $25 for a market order plus a commission of 12 cents per share. These fees will be deducted from the proceeds of the sale.

Helpful Links

The Brown-Forman Corporation’s Investor Relations Website

Current quote and financial summary for The Brown-Forman Corporation (finviz.com)

Information on the direct purchase and dividend reinvestment plans for BF-B

Want to find out about more great dividend growth stocks?

Check out the list of current S&P Dividend Aristocrats.