Is Ambev S.A. (ABEV) the Best Dividend Penny Stock to Buy According to Hedge Funds?

Ambev S.A. (ABEV), the largest brewer in Latin America and the Caribbean, has been gaining traction among hedge funds for its attractive dividend yield and growth potential. With a market capitalization of US$174.9 billion, ABEV is considered a penny stock, making it an appealing option for investors seeking high income and growth. This article explores the factors that make Ambev S.A. an attractive dividend penny stock and compares it to other beverage industry peers.

Dividend Yield and Growth

Ambev S.A. offers a high dividend yield of 5.34%, significantly higher than the average dividend yield of 3.58% for the beverage industry. Additionally, ABEV has demonstrated consistent dividend growth, with a 15.80% annual growth rate over the past three years and a 6.50% growth rate over the past five years. This compares favorably to the industry average growth rates.

Dividend Payout Ratio

Ambev S.A.'s dividend payout ratio is 0.80, which suggests that the company retains a significant portion of its earnings for reinvestment, indicating a sustainable dividend policy. This is lower than the industry average payout ratio of 0.85.

Profitability and Growth Metrics

Ambev S.A. has a strong profitability rank of 9 out of 10, indicating good earnings prowess relative to its peers. The company has reported positive net income for each of the past ten years. Additionally, ABEV's revenue per share has increased by approximately 15.30% per year on average, outperforming approximately 78.17% of global competitors. The company's 3-year EPS growth rate of 6.90% per year on average also outperforms approximately 43.43% of global competitors.

Market Capitalization and Snowflake Score

Ambev S.A.'s market capitalization of US$174.9 billion is relatively low compared to other large beverage companies, making it a potential undervalued opportunity for hedge funds. Additionally, ABEV has a Snowflake Score of 5/6, indicating that it is trading at a significant discount to its fair value, with a 38.5% intrinsic discount.

Competitive Landscape

Comparing ABEV to other dividend stocks in the beverage industry, such as Molson Coors Beverage (TAP), Boston Beer Company (SAM), Constellation Brands (STZ), and Keurig Dr Pepper (KDP), Ambev S.A. stands out due to its higher dividend yield, lower payout ratio, stronger profitability, and lower market capitalization. These factors make ABEV an attractive dividend penny stock for hedge funds, as it offers a combination of high income, growth potential, and undervaluation.

In conclusion, Ambev S.A.'s dividend history, growth rate, and strong financial performance make it an attractive dividend penny stock for hedge funds. Its high dividend yield, sustainable payout ratio, and undervalued market capitalization position ABEV as a compelling investment opportunity in the beverage industry. However, investors should carefully consider the potential risks associated with penny stocks, such as volatility and liquidity, before making an investment decision. By thoroughly evaluating Ambev S.A.'s fundamentals and market trends, investors can make informed decisions about whether ABEV is the right fit for their portfolios.