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A FTSE 100 dividend growth hero I have in my ISA and will never sell!

Latest financials from Diageo (LSE: DGE) in January were quite underwhelming. But as an owner of the drinks giant’s shares myself, I remain very excited about trading conditions as we embark on a new decade.

In that recent update, the FTSE 100 leviathan said that organic net sales growth for the fiscal year to June 2020 would be “towards the lower end” of its 4% to 6% mid-term guidance range. This reflects, in part, recent volatility in its Indian, Latin American and Caribbean markets, it said.

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It has witnessed some troubles in these markets of late. But recent data on consumer confidence in its US marketplace gives investors like me reasons to be cheerful. This is by far Diageo’s single largest market and responsible for 33% of sales at group level.

Stateside confidence picks up

The Conference Board survey of consumer sentiment soared to five-month highs in January, at 131.6. Citizens have become more upbeat of late on account of the solid jobs market, the body noted. And it suggested that there could be more to come. It said that “optimism about the labor market should continue to support confidence in the short term and, as a result, consumers will continue driving growth and prevent the economy from slowing in early 2020.”

Diageo’s latest trading update was undoubtedly a tad disappointing. But on the plus side, it highlighted the exceptional defensive qualities that a broad geographic footprint and huge stable of ever-evolving, market-leading labels provide. Organic net sales still grew a chubby 4.2% in the six months to December, despite some market volatility.

And this resilience is what makes the business such a great stock for income chasers. Annual earnings might dip, sure, but this only happens once in a blue moon, so beloved are Diageo’s labels like Captain Morgan rum and Johnnie Walker whisky all over the world. Such exceptional profits visibility gives it the confidence to raise dividends each and every year without fail.

Its formidable balance sheet gives it the strength to keep raising them irrespective of near-term pressure on profits. Diageo has raised interim and final dividends every year since the turn of the millennium.

Worth the price

City analysts certainly believe that dividends should keep climbing at the Footsie firm. Fiscal 2019’s 68.57p per share total payout is predicted to rise to 72.46p in the current year. An expected 4% earnings rise supports this bullish prediction.

This is not all. For financial 2021, broker tips of a 6% profits rise suggest that the full payout will march to 76.81p per share.

Okay, there are bigger yields out there than Diageo’s, which sit at 2.3% and 2.5% for this year and next. In fact those forward yields fall well short of the broader FTSE 100 average of 4.1%. Still, I consider the blue-chip to be a great buy irrespective of this and its weighty P/E ratio of 23.2 times for fiscal 2020.

Few Footsie shares have the sort of defensive qualities to ride out troubles in the global economy and keep growing earnings. And I for one am happy to have paid a premium to have it sitting in my shares portfolio.

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Royston Wild owns shares of Diageo. The Motley Fool UK has recommended Diageo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.