How Diageo plc Will Deliver Its Dividend

What can investors expect from Diageo plc (LON:DGE)’s dividend?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I’m looking at some of your favourite FTSE 100 companies and examining how each will deliver their dividends. Today, I’m putting drinks giant Diageo (LSE: DGE) (NYSE: DEO.US) under the microscope.

Dividend history

Diageo has one of the best dividend records around. Since the turn of the millennium the company has increased its dividend ahead of inflation each and every year. The table below shows the record of annual income growth shareholders have enjoyed.

Year Dividend
growth (%)
2000 7.7
2001 6.2
2002 6.7
2003 7.6
2004 7.8
2005 7.1
2006 5.2
2007 5.1
2008 5.0
2009 5.1
2010 5.5
2011 6.0
2012 7.7
2013 9.0

Dividend policy and prospects

Annual dividend increases averaged 7.2% between 2000 and 2005. You may have spotted that the rate of growth was not so high between 2006 and 2010; it averaged 5.2%. The growth in the latter period actually met the company’s policy at the time. That was to deliver annual increases of “about 5%”, the effect of which was to build dividend cover.

The situation changed after 2010. Within Diageo’s annual report for 2011, the board guided shareholders on the medium-term outlook for the business: average annual organic top-line growth of 6%, an improving operating margin and double-digit growth in earnings per share. Management said: “Achievement of these aims would underpin even stronger dividend growth”.

As you can see from the table, the rate of growth has been increasing since 2010, culminating in an uplift of 9% when Diageo announced its results last week — the largest increase seen during the past 14 years.

The chief executive said: “We remain on track to deliver our medium term guidance” — and City analysts have pencilled in dividend increases in excess of 9% for both 2014 and 2015.

Finally, I can tell you that Diageo is one of a select group of blue chips pinpointed as FTSE 100 winners by our top analysts within the very latest free Motley Fool report.

Our analysts believe this group of elite companies has what it takes to deliver superior long-term earnings and income growth. Such is their conviction about the quality of these businesses that they’ve called the report “5 Shares To Retire On“.

You can download this free report right now — simply click here.

> G A Chester does not own any shares mentioned in this article.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Investing Articles

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

This forgotten FTSE 100 gem could be the best bargain on the stock market

The FTSE 100 is full to the brim of high-quality businesses. But this Fool has his eye on this 'forgotten'…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

Here’s a FTSE 250 stock I’d put 100% of my money into

If this Fool could buy just one stock from the FTSE 250, Games Workshop would be his choice. Here, he…

Read more »

Fans of Warren Buffett taking his photo
Investing Articles

2 reasons Warren Buffett might love this stock, and 1 reason he might avoid it like the plague

Warren Buffett's one of the best stock pickers of all time. But would he approve of Barclays shares? This Fool…

Read more »

Union Jack flag triangular bunting hanging in a street
Investing Articles

Down 28% in a week! What’s going on with the share price of this FTSE 250 British icon?

There’s one stock in the FTSE 250 that took a bit of a battering last week. But I’m not surprised,…

Read more »

Two white male workmen working on site at an oil rig
Investing Articles

At around £28.50, Shell’s share price looks cheap to me

Shell’s share price still looks undervalued against its fossil-fuel-focused rivals to me, despite it pushing back its carbon reduction targets.

Read more »

BUY AND HOLD spelled in letters on top of a pile of books. Alongside is a piggy bank in glasses. Buy and hold is a popular long term stock and shares strategy.
Investing Articles

433 shares in this FTSE 100 dividend superstar could make me £18,803 in annual passive income!

This overlooked FTSE 100 gem has one of the best yields in the index, looks undervalued, and makes me big…

Read more »

Investing Articles

2 under-the-radar investment trusts I’d buy for a new Stocks and Shares ISA

Here are two fantastic trusts that I'd happily snap up today if I were building a Stocks and Shares ISA…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

If I’d put £1k in Games Workshop shares 5 years ago, here’s how much I’d have now!

Games Workshop shares have proved to be a stellar investment in recent years. Charlie Carman examines whether this trend can…

Read more »