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Constellation Brands Declares New Buyback Plan; Stock Up


In a bid to boost confidence among investors and reward them, Constellation Brands Inc. STZ has been making regular dividend payments and share buybacks. Recently, the world’s largest wine company announced a new share buyback program of $1 billion. This buyback program is in addition to the company’s existing repurchase authorization of $1 billion.

However, not much movement was noticed in the stock despite the announcement. Shares gained nearly 1.4% yesterday.

Coming to dividend payments, Constellation Brands initiated the same in Apr 2015. Further, it increased its dividend payout by 29% to 40 cents a share from 31 cents in April this year.

Constellation Brands has been consistently generating strong cash flows from its beer as well as wine and spirits businesses. This is evident from cash from operations of $1,044.9 million and free cash flows of $676 million generated in first-half fiscal 2017.

Going forward, the company expects free cash flow and operating cash flow for fiscal 2017 in a range of $375–$475 million and $1.5–$1.7 billion, respectively.

Share repurchase programs and dividend payments are frequent among companies with a stable cash position and healthy cash flow. Apart from Constellation Brands, many other companies like NIKE, Inc. NKE, Tractor Supply Company TSCO and Avis Budget Group, Inc. CAR follow these practices to strengthen their commitment toward shareholders.

Coming back to Constellation Brands, its investment grade has been upgraded by Fitch and S&P Credit Rating Agencies. We note that continued strength in its cash generating ability and sustained growth will likely help the company to return more value to its shareholders, going forward.



Constellation Brands carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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