1 Magnificent S&P 500 Dividend Stock Down 66% to Buy and Hold Forever

The alcohol industry is going through what might be its most challenging time in recent history.

Shares of just about every notable alcohol stock are down, including Brown-Forman Corp. (NYSE: BF.B)(NYSE: BF.A). The company, most famous for its Jack Daniel's brand of American whiskey, has tumbled a whopping 66% from its high.

Despite the stock's poor performance, Brown-Forman still shows significant promise moving forward. The company is facing numerous headwinds, but most will likely ease over time, allowing it to shine again as it has for generations.

Here is why it could be worth leaning into the pain, buying the stock at a massive discount, and holding this magnificent S&P 500 dividend stock forever.

Image source: Getty Images.

Numerous headwinds have weighed on the business and stock

Brown-Forman is primarily known for its Jack Daniel's whiskey brand. It's one of the most popular whiskey brands in the world, with an iconic name that oozes Americana. Brown-Forman's offerings span over 40 Jack Daniel's products, other spirits, and ready-to-drink beverages.

But the company has struggled with revenue declining over the past couple of years. Brown-Forman is facing several industrywide headwinds, including:

• Consumer sentiment has plunged, impacting people's willingness to go out to bars and restaurants.
• Young consumers are drinking less than previous generations due to increased health awareness about the adverse effects of alcohol consumption.
• Tariffs and politics have disrupted cross-border sales.

Again, these concerns aren't unique to Brown-Forman. Americans are drinking at their lowest rate in 90 years, and that's clearly weighing on the entire industry. Brown-Forman is guiding to a low-single-digit sales decline for fiscal year 2026.

There's some helpful context here.

America's spirits industry, specifically whiskey and bourbon, enjoyed a growth spurt immediately following COVID-19. Distillers cranked up production to keep up, and that has turned into a supply glut now that the market has moderated. This is applying additional pressure on top of the issues listed above.

How Brown-Forman can get back on track

Despite the clear slump Brown-Forman finds itself in, there are reasons for optimism.

The company has a history of innovation, launching new Jack Daniel's flavors and new batch versions. It has also found success in ready-to-drink products, partnering with Coca-Cola on a Jack and Coke product. Brown-Forman's ready-to-drink sales grew by 9% in its most recent quarter.

Brown-Forman has a presence in roughly 170 countries, but the U.S. still accounts for almost half its sales. Whiskey consumption is strong in several international markets, including Brazil, India, and parts of Asia. There is significant growth potential in those regions if the company can effectively promote its brands.

Investors should keep growth expectations anchored, but I think it's probably a stretch to say Brown-Forman will never return to sales growth. As supply and demand balance out, that should allow for growth to resume at a slow, steady pace in line with historical norms. Meanwhile, economic headwinds should ease as consumer financial health improves.

Yes, it may take a leap of faith, but Jack Daniel's has been around for generations. Sometimes, companies hit a roadblock and must evolve or adapt before moving forward again.

The adversity is real, but it has presented a juicy opportunity

Speaking to Brown-Forman's stellar reputation, check out the stock's historical valuation. Shares have averaged a price-to-earnings (P/E) ratio of 25 since the late 1990s. The stock trades at just 15 times earnings today.

Brown-Forman hasn't been a growth stock in some time, but the company is traditionally highly profitable and dependable. Brown-Forman has paid and raised its cash dividend for 41 consecutive years, and the stock's decline has pushed the dividend yield to 3.3%, well above its historical norms.

It's more than fair to acknowledge the company's current challenges, which is why investors should be thrilled about the stock's decline. At 15 times earnings, the stock reflects those risks. And if Brown-Forman gets back on track, investors should be in for some really nice returns as the market trades the stock's valuation back toward its historical averages.

Brown-Forman looks beaten and bloodied, but its core business fundamentals still seem intact. That makes this historically magnificent dividend stock worth buying and holding while the company navigates some admittedly tough challenges.

Justin Pope has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.