This alcohol stock was just upgraded by Morgan Stanley to ‘overweight.’ The shares have a current dividend yield of 2.80%, paid semi-annually.
Diageo plc (DEO)
From Sure Dividend
Diageo is one of the largest beverage companies in the world, with a market capitalization near $100 billion. It is also one of the world’s oldest companies, tracing its history all the way back to the 1600s. Diageo is a true alcohol conglomerate, with a huge brand portfolio. Diageo owns 20 of the world’s top 100 spirits brands. A few of its core brands include Johnnie Walker, Smirnoff, Captain Morgan, Baileys, Tanqueray, Guinness, Crown Royal, and Ketel One.
Diageo was not immune to the coronavirus pandemic, and its financial results weakened in the most recent fiscal year. Global organic net sales declined 8% for fiscal 2020. But on the positive side, Diageo notched organic growth in North America for the fiscal year. This is important, as North America is the company’s biggest market at 39% of total revenue.
While the recently-concluded fiscal year was widely viewed as a disappointment for the company, Diageo has a bright long-term future, which puts it on this list of reliable alcohol stocks. One big reason is its entrenched position in under-developed nations around the world. The emerging markets are more important for Diageo, which is a headwind in the short-term, but is likely to be a long-term tailwind.
Emerging markets are among the fastest-growing economies in the world. For example, Africa, Latin America & the Caribbean, and Asia-Pacific represent nearly 40% of company revenue. When the global economy returns to normal, these markets should once again return to higher growth rates.
Diageo pays a semi-annual dividend, meaning two payments per year. It typically pays an interim dividend in April and a final dividend in October. The approximate split between the two payments is 40/60. For 2020, the annual dividend payout came to $3.55 in U.S. dollars. The 2020 dividend was increased by approximately 3.5% from the 2019 payout, making Diageo stock a mix of dividend yield and growth.
Ben Reynolds & Bob Ciura, Sure Dividend Newsletter, suredividend.com, support@suredividend.com, 800-531-0465, November 25, 2020