Brown-Forman Stock Split: Raise a Glass to Big Returns

By Markets

Image source: Brown-Forman.

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The profession of making alcoholic beverages spans millennia, and countless entrepreneurs over the centuries have sought ways to make money by producing and distributing beer, wine, and spirits. Brown-Forman (NYSE: BF-A) (NYSE: BF-B) has a somewhat shorter history, dating back to co-founder George Garvin Brown's formation of his Kentucky-based spirits business in 1870. Now, the maker of Jack Daniel's whiskey, Finlandia vodka, and Sonoma-Cutrer wines is a major player in the global market for alcoholic beverages, and along the way, it has shared its success with shareholders by splitting its shares on a frequent basis. Below, we'll look more closely at Brown-Forman's latest stock split to put it into context with its past split history.

Brown-Forman stock splits

Here are the dates and split ratios for the stock splits that Brown-Forman has done in the past:

Date of Split

Split Ratio

Jul. 2, 1981

2 for 1

April 2, 1987

3 for 2

May 31, 1994

3 for 1

Jan. 21, 2004

2 for 1

Oct. 6, 2008

5 for 4

Aug. 10, 2012

3 for 2

Aug. 18, 2016

2 for 1

Data source: Brown-Forman investor relations.

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As you can see, Brown-Forman has regularly split its shares. That's consistent with its strong share-price performance, which has given investors average annual total returns of more than 16% over the past 30 years.

When Brown-Forman historically did stock splits

Brown-Forman's history of stock splits has been more varied than most companies, using a variety of different split ratios and trigger points. In 1987, for instance, the company's stock quickly climbed by almost 50%, and Brown-Forman's decision to do a 3-for-2 stock split effectively left the share price where it had been before the rise. The 1994 split was apparently motivated by the then-common goal of avoiding triple-digit share prices, and Brown-Forman aggressively chose a 3-for-1 split to send its share price from above $90 back toward $30. That move was sufficient for the next decade.

By 2004, the stock was once again approaching the $100 level, and a 2-for-1 split pushed it back into the mid-$40s briefly. Brown-Forman even held its own during the 2008 recession, but nervousness about the state of the financial markets might have been a factor in the spirits-maker's decision to do a 5-for-4 split. Nevertheless, Brown-Forman shares again came close to cracking the triple-digit mark by 2012, spurring another split.

Brown-Forman's latest stock split

Most recently, Brown-Forman just completed a 2-for-1 split during the summer. The company waited somewhat longer than it would have in the past before moving forward with the stock split, letting the shares trade in for near triple-digit levels for more than a year before taking action.

Nevertheless, Brown-Forman had a fairly casual attitude toward the move. "The recommended 2-for-1 stock split reflects the company's confidence in our ability to sustainably grow our sales, earnings, and cash flow over the long term," said CEO Paul Varga, "and marks the seventh split in 35 years."

When will Brown-Forman split again?

With the split having just taken effect, Brown-Forman stock is now safely back down into two-digit territory, recently trading near $50 per share. It's likely that the company will hold off on future splits until the share price once again climbs up toward $100, requiring another doubling for the stock.

Also potentially holding Brown-Forman back is its dividend. With a current yield of 1.6%, Brown-Forman certainly isn't among the highest-paying stocks in the market broadly or in the spirits industry more specifically. Yet the current dividend of $1.40 per share every year essentially reflects a drain of cash that holds down the share price by that amount. Therefore, Brown-Forman has to produce total returns that are high enough to pay that dividend and get the share price to move higher.

Given its past history, Brown-Forman investors shouldn't expect another stock split for several years. Nevertheless, given the dedication the spirits-maker has to sharing its success with its shareholders, Brown-Forman is likely to split again at some point when its stock price warrants another move.

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