Diageo shares (LON: DGE) are publicly traded on the London Stock Exchange under the symbol DGE and are included in the FTSE 100 index, underscoring its significance in the financial markets.
As a consistent dividend payer with positive analyst sentiment it would be easy for many to call Diageo a ‘buy’, but there is a lot more to consider in the recent history that warrants a look.
Diageo EPS and Revenue Breakdown 2020-2023
Diageo (LON: DGE) is a British alcohol beverage company founded in London in 1997. It has expanded its presence across various international markets, establishing itself as a prominent player in the industry. It now has a presence across nearly 180 countries, with 132 production sites. The company has a strong presence in the key North American market, with 3,100 employees and 12 production sites. Furthermore, Diageo has a diverse portfolio of more than 200 brands, such as Guinness, Smirnoff, Baileys, and more under its banner.
In addition to its primary operations, the company has continually pursued partnerships and innovations to enhance its product offerings and align with evolving consumer trends.
Diageo Share Price & Dividend Yield
Since late 2022, the Diageo share price has struggled, posting a consistent downtrend to where it now (April 3, 2024) trades around the 2,925p mark, its lowest level since March 2021. At the end of January 2024, Diageo’s stock fell to lows last seen in 2020. While the stock has found a slight base since then, it is still some way off its 2021 high of over 4,100p per share.
Despite the disappointing share price growth in recent years, Diageo does usually pay dividends twice per year. Its current dividend yield is at 2.78%.
Diageo Share Price Forecast
In a recent client note, analysts at Kepler Cheuvreux raised their rating for Diageo to Buy from Hold with a 3,500p price target.
However, earlier in the year, some analysts began downgrading the stock. For example, Exane BNP Paribas analyst Jeff Stent cut Diageo to Underperform from Neutral, lowering the price target to 2,500p from 3,000p. At the time (January 12), the analyst said he saw a downside risk to consensus earnings estimates across the beverage sector.
On January 11, BofA downgraded Diageo to Neutral from Buy, lowering the price target for the company’s US-listed shares to $155 from $164. The firm stated that they expected the US, which is essential to Diageo’s sentiment and valuation, to remain lackluster and disappoint. Furthermore, the firm noted that earnings risk was still on the downside.
Our View: Given the stock’s more recent struggles, we have more of a cautious view when assessing Diageo. The dividend may attract income-focused investors but the recent lack of share price growth is something to take into consideration.
Who Should Buy Diageo Shares
Before making the decision to invest in Diageo shares, several factors should be taken into account. For example, aspects such as risk tolerance, dividends, investment goals, and potential ethical considerations should be assessed.
Diageo, as a leading global producer of spirits and alcoholic beverages, operates in an industry subject to various market and regulatory risks. Investors with a moderate risk tolerance and an understanding of the consumer goods sector may find Diageo shares suitable for their investment portfolio.
Diageo has a history of paying dividends twice per year, which may be attractive to income-focused investors. The company’s consistent dividend payments and potential for future dividend growth could cater to the needs of investors seeking regular income from their investments.
Diageo is not a growth stock. Therefore, individuals with a long-term investment horizon and an interest in the consumer goods sector may find Diageo shares appealing. The company’s diverse portfolio of well-established brands and its global market presence could be suitable for those looking for companies with a long-standing reputation in the sector.
Probably the most important aspect to consider is something for investors with specific ethical or religious beliefs regarding alcohol consumption. They will need to evaluate their stance on investing in a company within the alcoholic beverages industry. It’s important for individuals to align their investment decisions with their personal values and beliefs.
