Category Archives: Altimeter

In the previous post dated November 13, 2019, we reviewed the year-over-year change in the annual dividend and contrasted that against the payout ratio for Anheuser-Busch (BUD).  In this posting, we’re going to review the payout ratio for BUD since 1982 and contrast that to Edson Gould’s Altimeter.

The dividend payout ratio for BUD is a reflection of the amount of the annual dividend paid relative to the annual earnings.  A payout ratio above 100% means the company is paying more in dividends than what is being earned.  Alternatively, a dividend payout ratio at less than 50% generally means that the company is in a position to keep the dividend or potentially increase, based on business prospects.

Below is a charting of the dividend payout ratio as derived from Value Line Investment Survey and Barron’s from 1982 to 2019.

The period from the end of 2007 to the end of 2009 is when BUD was in transition to becoming part of InBev (previous symbol INB.Belgium).

Below is the charting of the Altimeter as outlined in the work of Edson Gould which is a relative comparison between the dividend and price and does a fantastic job of indicating when a stock is undervalued or overvalued.

Oddly enough, the beginning of the chart from 1982 to 1985 is very similar to the period from 2010 to 2018.  In both cases, the Altimeter swings from a vast level overvaluation to more modest levels.  However, as seen in the dividend payout ratio in the first chart, the significant difference is that BUD never exceeded the payout ratio of 50% from 1982 to 2007.  Meanwhile, in the period from 2010 to the present, several years have been spent with the payout ratios exceeding 100%.

What is most important to look at in the Altimeter is the horizontal red line.  That line indicates a tendency (1982-2007) for BUD be undervalued and bought without reservation.  It should be noted that within the established historical range, InBev acquired BUD at the most expensive price relative to that period.

Unfortunately, since the acquisition by InBev, BUD needs at least a full economic cycle before investors can determine the range of valuations on a fundamental basis.  The InBev era does not sufficiently equate to the period prior to 2007.  So far, the analysis by Sean Walters in Barron’s, at the time of the acquisition, seemed accurate when he said:

“Yes, there is a positive correlation between brewers' size and profitability. But its limits might be tested by an InBev-Anheuser tie-up (Walters, Sean. Is a Bigger InBev Better?.Barron's. June 16, 2008. M7.).”

Our next review on BUD will look at what the price tells us regarding the short and medium-term prospects for the stock.