Stock markets have had a wild 2025 so far. Share prices reached new highs, before plunging following the threat of high tariffs on US imports. And among UK stocks, the Diageo (LSE: DGE) share price keeps finding fresh lows.
The FTSE 100’s comeback
The FTSE 100 had a great start to this year, hitting a record high of 8,908.82 on 3 March. However, this march to 9,000 ended when share prices started to slide.
Within a month, stock markets worldwide plunged after President Donald Trump unveiled high tariffs on US imports. This produced one of the worst weeks for investors in five years. At its 2025 low, the UK index slumped to 7,544.83 on 7 April.
After Trump suspended new tariffs for 90 days, share prices roared back to life. The Footsie now stands at 8,698, just 2.4% below its peak. However, this latest market meltdown hit some UK stocks harder than others.
Diageo’s hangover
For example, take the shares of global drinks maker Diageo, currently valued at £44.8bn. Formed by the merger of drinks giants Grand Metropolitan and Guinness in 1997, this great British business is a powerhouse in the global market for alcoholic drinks. Alas, shareholders have struggled since sales boomed in 2021.
Though the Diageo share price plunged during the Covid-19 crisis in 2020, its stock soared as normality resumed in 2021. The shares closed that year at 4,036p, just short of their record high. Unfortunately, it’s been steeply downhill for this stock ever since.
Here’s how this Footsie stock has performed over eight timescales:
| One week | -4.5% |
| One month | -1.9% |
| Three months | -5.9% |
| Six months | -14.1% |
| One year | -24.9% |
| Two years | -41.8% |
| Three years | -42.7% |
| Five years | -27.3% |
Note that price momentum: this stock has fallen over all eight periods, ranging from one week to five years. Diageo shares seem so weak right now, but all things tend to come to an end. Indeed, the stock’s 52-week low was 1,908p on 7 April, so it has been lower this year.
Currently, this FTSE 100 stock trades on 16.7 times trailing earnings, delivering an earnings yield of 6% a year. Therefore, the dividend yield of 3.9% a year is covered more than 1.5 times by historic earnings. This margin of safety seems enough to sustain dividend payouts at present levels, but a cut would likely hit the share price hard.
As I see it, Diageo’s biggest problem is sliding sales due to changing social attitudes to alcohol. Young adults are made very aware of the harms caused by long-term alcohol consumption. Also, legal (and illicit) cannabis is crimping sales of ethanol-based rivals. And other group activities — including video gaming and social media — are growing alternatives to meeting for drinks in bars, pubs, and clubs.
With its stock down over 50% since its end-2021 high, Diageo looks like a ‘fallen angel’ value stock to me. Then again, sales growth has reversed and margins are falling, which is sobering for shareholders. Still, a $500m cost-cutting initiative should boost earnings and cash flow in time, despite a potential $150m hit from higher US tariffs.
In summary, the ailing Diageo share price could be a good entry point for value/dividend investors to consider. But as my wife and I already own this stock, we will sit tight for now!
