Ambev SA (ADR) (NYSE:ABEV), a Brazilian company trading in the US, is suffering from the weak Brazilian economy just like all other Brazilian stocks in spite of the bull market in US. The Brazilian political environment is not very amiable for the economy right now and that is affecting all the companies. The President Dilma Rouseff tried to push a presidential decree that cuts payroll tax breaks for businesses but that was rejected by the Senate. If successful, that reduction of tax break would result into a savings of 5.3 billion reals in 2015 and 12.8 billion reals in 2016 for the government.
The budget deficit of the country has increased by 3 times in the first term of Dilma Rouseff and that is why the Ministry of Finance is trying to come up with several cost cutting measures designed to reduce that deficit but 40 out of 59 legislators in Rouseff’s ruling Workers’ Party opposes the government’s proposed budget measures. Currently the probability of Brazil succeeding with its fiscal adjustment plan has definitely declined and a ratings downgrade can’t be ruled out. If that comes true, that will affect nearly all the major companies including Ambev SA (ADR) (NYSE:ABEV).
Last week, the quarterly cash dividend of Ambev SA (ADR) (NYSE:ABEV) was increased by 4% to $0.51 from the earlier $0.49 by the board of directors. The shareholders of record on April 15, 2015 will receive the cash dividend on May 15, 2015.
Technically, the bears are taking a pause for the first time in last one year. The stock is stuck in a range of $5.60-$6.80 for the last 3-4 months and only a resolution of this range will produce a meaningful move. The series of lower highs and lower lows has kept the downtrend intact and only a break above $6.80 levels will reverse it.