This “Forgotten” Dividend Aristocrat Is 25% Undervalued and Effectively Yields More Than a Treasury Bond

The market is starting to flood back into defensive and Dividend Aristocrat stocks before the economic pendulum swings the other way. The good news is that you’d still be ahead of the herd if you accumulate stocks like Brown-Forman (NYSE:BF.A | BF-A Price Prediction, NYSE:BF.B). While you probably haven’t heard of this name in a long time, it is suddenly back in the spotlight after today’s news that the company rejected a $15 billion cash takeover bid from Sazerac.

Brown-Forman is the largest American-owned global spirits company. Its crown jewel is Jack Daniel’s Tennessee Whiskey, but the portfolio also includes Woodford Reserve, Herradura, and the fast-growing Diplomático Rum. You’re looking at a company commanding an estimated 34% of the total U.S. Whiskey & Bourbon Distilleries industry revenue.

The lengthy maturation process for aged whiskey creates a massive barrier to entry for competitors, and Brown-Forman controls its entire value chain from production to distribution.

The Targeted Aristocrat: The best time to accumulate is now

The stock is off by 64% from its 2020 peak and is showing signs of bottoming out, further validated by the $32/share floor set by Sazerac’s recent offer.

But why did it decline in the first place?

The single biggest factor is that Brown-Forman was absurdly overvalued heading into 2020. However, in 2026, BF-B stock is now too undervalued. You’re paying just 17 times earnings for this stock. Historically, the median price-earnings ratio has been 34 times.

Operational turnaround and Q3 earnings beat

While recent 3-year growth has been anemic, the company’s Q3 2026 results reported on March 3 showed a significant turnaround with an EPS of $0.58, beating estimates by 23%. High CapEx and interest rates pressured past cash flow, but the worst is likely behind us.

The business has gotten considerably leaner.

Here’s what Brown-Forman reported for FY 2024.

Here’s last year.

Notice how the business managed to generate significantly higher free cash flow as CapEx finally started to come down. This was boosted further by the $350 million in cash generated from the Duckhorn sale earlier this year.

I see upside ahead, plus the dividends

The business is churning out profits with a 21% net margin. I see at least a 25-30% upside potential from here by next year, especially as the “destocking” issues that plagued 2025 have stabilized.

A 25x earnings premium on top of earnings estimates gives us a price above $40.

The dividend yield of 3% is increasingly attractive as the 10-year Treasury yield sits at 4.41%. While nominal yields trail bonds, the “Ready-to-Drink” (RTD) portfolio growth provides a fundamental tailwind bonds simply can’t match.

And the icing on the cake is that the dividends have a lot of growth left. Share buybacks have pushed the shareholder yield to an effective 6.58%. With a 42-year streak of increasing dividends, there is still massive room left for more increases.

Editor’s Note: This article was updated on May 12, 2026, to include the breaking news of Brown-Forman’s rejection of a $15 billion takeover bid from Sazerac and to reflect the latest Q3 2026 earnings beat data. We have also revised the macroeconomic analysis to include current 10-year Treasury yields of 4.41% and updated the growth outlook to account for the stabilization of industry-wide destocking trends.