DGEAF - Are Diageo Shares A Buy After Their 35% Price Decline?
2024-06-15 01:20:00 ET
Summary
- Diageo’s dividend has increased every year for more than 20 years, so it has an exceptional track record of progressive dividend growth.
- Diageo’s declining equity is slightly odd because a growing company will usually be growing its equity, as that’s the foundational source of funding upon which the rest of the business depends.
- Looking beyond the short-term headwinds, Diageo still operates in a very large and growing market.
Diageo ([[DEO]], [[DGEAF]]) is the world's leading producer of premium alcoholic beverages, with a portfolio of world-leading brands, including Guinness, Johnnie Walker, Smirnoff, Tanqueray, Baileys, and many more.
Throughout the 21st century, Diageo has produced extremely consistent results, growing its dividend every single year, come rain, shine, global financial crises or pandemics. That's impressive, but 2024 has not gone well, with falling sales in Latin America and weak growth elsewhere.
Those weak results have knocked 35% off Diageo's share price, leaving its shares trading at a far more attractive valuation. But is it attractive enough to make the shares a buy?
Before diving into a full review of Diageo's financial results, business model, competitive advantages, future prospects and valuation, here are a few key facts to set the scene:
- Size: Diageo is a member of the FTSE 100 and with its share price at £25.80, it has a market cap of £58 billion
- Industry: It operates in the defensive Consumer Staples industry, and within that, the Beverages sector
- Geography: It's also a very international business, generating 39% of its revenues in North America, 21% in Europe (including 6% in the UK), 19% in Asia Pacific and 10% in Latin America & Caribbean