Ticker: CCU, Buy below $22.
CCU is a Chilean producer of diversified beverages. The company produces both alcoholic and non-alcoholic beverages. They have operations in Chile, Argentina, Bolivia, Colombia, Paraguay, Uruguay and Peru.
Why I Would Buy
- Contrarian Buy – Dislocation in Chile has led to a double whammy: the stock has crashed; additionally Chilean Peso has crashed against the US Dollar.
- Industry – CCU produces and markets alcoholic and non-alcoholic beverages in multiple Latin American markets. Beverages are generally a recession-resistant, high margin business.
- Dividend – 3% yield, payout ratio has stayed below 50% for past 10 years.
- Return on Equity: CCU has earned double digit returns on equity for most of last decade
What Could Go Wrong
- Chilean Social Unrest – Severity of Chilean social crisis is unknown. Result of the constitutional rewrite could be severe socialism, and wipe out all private investments.
- High Dividend Taxes – Chile extracts very high taxes of 35% on dividends.
Disclosure: I am long CCU, please read additional disclosures here before taking any action based on this post.