Although there’s still a few days left of trading in 2021, I think now’s a great time to review the performance of my top stock for 2021 — FTSE 100 beverage behemoth Diageo (LSE: DGE).

FTSE 100 beater

Despite the stop-start pandemic, supply chain disruption and rising inflation, Diageo investors have had a great year. At the close of play on Christmas Eve, its shares had climbed 36% in value during 2021.

This gain compares very favourably to the index in which Diageo features. Year-to-date, the FTSE 100 has increased 12% in value. That’s certainly not a bad result for those invested in funds tracking the market return. However, it’s yet more evidence that carefully selected shares (combined with a fair dollop of luck) can prove far more lucrative.

Is the FTSE 100 the best benchmark to use though? Given the dearth of companies similar to Diageo in the UK market, one needs to look abroad. In Europe, Pernod Ricard is up by 33% but Heineken Holdings has climbed just 4% in value. In the US, Brown-Forman has fallen almost 8%.

Given this, I think it’s hard to see Diageo’s performance as anything but stellar. In fact, the stock is now at an all-time high.

Why has Diageo done so well?

A good portion of Diageo’s success can be put down to the fact that cashed-up consumers have treated themselves to premium drinks brands to get them through lockdowns. Another reason has been the company’s decision to continue growing its cash payouts.

Investors have also lapped up the bullish outlook put out by CEO Ivan Menezes. Back in November, Diageo announced that it expected organic sales growth to come in between 5% and 7% from 2023 to 2025. As a comparison, growth of 4% to 6% was achieved from 2017 to 2019. 

Still a buy?

Following this year’s solid gains, Diageo’s shares now trade at 30 times earnings. That’s certainly not cheap relative to some shares in the FTSE 100. In fact, it’s far above the company’s own five-year average price-to-earnings (P/E) ratio of just below 24. So, is this stock still worth me buying today?

While I’m not convinced that Covid-19 will disappear in a puff of smoke, a relaxation of restrictions will undoubtedly be good news for the company. Sales at pubs and bars will recover. Investment bank Société Generale believes the company’s growth in the US can continue too. Its price target of 4,500p is 12% up from where we are now. 

Naturally, the bear case is very much the opposite of what I’ve just said: the pandemic drags on and savings start to dwindle without the support of a furlough scheme. In such a scenario — and considering the aforementioned valuation — the recent share price action could reverse. Earlier this month, broker RBC set a price target of 3,100p based on its belief that earnings momentum might be slowing amid low consumer sentiment in the US.

My verdict

Would I buy Diageo’s stock now? I’m not completely against it. I still consider it one of the best in the UK’s top tier, even if the shares do give up some of their gains in 2022. 

That said, I do think there’s potentially better value elsewhere in the market, particularly if I were also looking to build a diversified portfolio that could withstand whatever 2022 throws at it. 

Diageo isn’t my top stock to buy for 2022 but these are. 

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Paul Summers has no position in any of the shares mentioned. 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.

FTSE 100 recovery play

Naturally, the near-blanket closure of hospitality venues over the last year was never going to be great news for the company. Indeed, Diageo reported today that Covid-19 “significantly restricted” many of its markets. Beer sales in Europe were especially affected, it said. Then again, I think these hurdles have allowed the company to show just how resilient it is.

Today, the FTSE 100 member announced net sales of £12.7bn for the year ending 30 June. That’s an 8.3% rise on sales at this point in 2020. In fact, it would have been even better if not for the impact of foreign exchange headwinds. Operating profit also jumped 74.6% to £3.7bn.

As an indication of just how well the company had managed the pandemic, Diageo revealed it had managed to hold or grow its share of the off-trade market (drinks not consumed in places like bars and restaurants) in over 85% of its business. Moreover, this growth doesn’t appear confined to just a few tipples. Sales of drinks such as tequila, scotch, white spirits and Baileys were all up.

In terms of geography, North America was particularly buoyant, helped by a rise in the popularity of premium spirits. That’s handy, considering this is Diageo’s largest market. 

Long-term winner

Of course, I’d never buy a stock purely on one set of results. The real test of a company’s quality is its ability to grow my money over the long term. On this front, Diageo would score very well. Today, it announced it had delivered annualised returns of 13% for shareholders over the last decade. 

I think this performance will continue, especially as its bumper £3bn in free cash flow should allow it to remain an ultra-reliable dividend payer. 

Today, the company announced a total payout of 72.55p a pop — an increase of 4% on that returned in 2020. This gives Diageo a trailing yield of 2.1%. Now, that’s far below what I can get elsewhere in the FTSE 100. However, higher yields usually involve more risk, such as owning stakes of companies in far more cyclical markets.

So, if I were looking to generate a reliable dividend stream that I could ‘set and forget’, Diageo would arguably be the better buy.

Buy and hold

Diageo’s shares are trading flat this morning, suggesting that much of today’s news was already priced in. At 27 times forecast earnings before markets opened, the stock certainly isn’t cheap.

Nor is the firm immune from setbacks. Indeed, CEO Ivan Menezes reflected that the blue-chip still expected “near-term volatility in some markets.” And while Covid-19 infection levels seem to be mercifully reducing here, there’s no guarantee rising cases elsewhere in the world won’t impact trading for the rest of 2021 and beyond. 

Notwithstanding this risk, today’s numbers from the FTSE 100 stock, supported by its historical performance, suggest to me this should still be a great long-term hold. 

The post 1 FTSE 100 stock I’d buy and hold forever appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. 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.

“Positive start”

Today’s interim results from Vimto-owner Nichols should provide some comfort to investors. Revenue increased 13.8% to £67.4m over the first six months of 2021, with adjusted pre-tax profit moving almost 32% higher to £8.9m.

Sure, some improvement was expected due to the loosening of restrictions. Even so, news that the company’s Vimto Dilutes range significantly outperformed the UK market between January and June bodes well.

Sales of Vimto have been rebounding overseas too. International growth of 42.3% was recorded compared to the prior year. Sales in regions such as the Middle East (the drink is incredibly popular over Ramadan) appear to have held up well.

And the outlook? Well, Nichols believes that its “positive start” to 2021 should allow it to meet management expectations for the full year. However, I now wonder if the recent weather might lead to a slight increase in guidance next time around.

All told, I’m satisfied with today’s update and would be happy to add to my position today. A good recovery in sales, not to mention a strong balance sheet and solid portfolio of brands (which now includes SLUSH PUPPiE), makes me think this is one of the best stocks to buy now in this space.  

“Better than anticipated” trading

Today’s results from Nichols followed hot on the heels of fellow drinks maker AG Barr. Like the former, Barr has had to contend with the shutdown of the hospitality industry over the pandemic. Like Nichols, the company’s now showing signs of recovery.

Yesterday, Barr announced that full-year profit would now likely be ahead of expectations due to “better than anticipated” trading. This helped its previously-sluggish share price to recapture some of its lost mojo.

Again, I think Barr will do well in time and there’s more upside ahead. It’s another quality operator that’s conservatively run. It also has a good number of ‘sticky brands’ such as IRN-BRU, Rubicon and Funkin. So I’m tempted to continue accumulating the shares.

Sales tailwind

As a holder of both stocks, it’s hard for me to sit on the fence when looking at NICL and BAG. Notwithstanding this, I’m encouraged by recent trading. I also suspect the blazingly-hot summer in their home market will prove a tailwind for sales.

This isn’t to say I shouldn’t be careful. Owning multiple companies in the same sector isn’t without risk. Although no lasting damage appears to have been done, the introduction of the sugar tax on soft drinks a few years ago was proof that even the most defensive companies can face challenges.

Going forward, it goes without saying that Delta infection levels may get so bad that some restrictions may need to be re-introduced. This may hamper demand for both product stocks. 

So long as I keep my exposure in check by investing elsewhere, I think the reward will be worth it if I bought more now. 

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Paul Summers owns shares in AG Barr and Nichols. The Motley Fool UK has recommended AG Barr and Nichols. 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.

AG Barr

In contrast to other consumer goods stocks, the share price of drinks firm AG Barr (LSE: BAG) is still to see some serious positive momentum. Nevertheless, today’s trading statement does hint that the recovery is getting closer.

This morning, Barr said that trading has been in line with management expectations. That’s comforting considering the UK was in lockdown for the early part of 2021.

As investors might expect, the easing of restrictions and re-opening of hospitality and leisure venues have provided a much-needed boost to sales. This is particularly the case for its Funkin ready-to-drink cocktails business (although people still seem to be consuming these at home). Elsewhere, the launch of new products, such as Rubicon RAW Energy, have been well-received by consumers. 

There were also encouraging noises on dividends. Now, income isn’t a priority for growth investors like me (I simply re-invest what I receive). However, I do use it as a gauge for just how confident management is on future trading. Today, Barr announced it remained committed to restoring cash returns in the current financial year. More news is expected in August.

A forecast price-to-earnings ratio of 22 isn’t initially appealing, especially given the risk of coronavirus infections climbing again. Naturally, any change to Boris Johnson’s roadmap back to normality would not go down well with the market.

Nevertheless, it’s worth highlighting that BAG is still 45% off the valuation it hit almost exactly two years ago. It’ll take a while, but I firmly believe the Irn-Bru owner will fizz in time.

Avon Rubber

A second growth stock that’s still far off previous highs is life-critical personal protection firm Avon Rubber (LSE: AVON). Thanks to the strangely muted reaction to this week’s encouraging interim results, I think there’s still time for investors like me to get involved in this quality company.

According to CEO Paul McDonald, the firm has made a “strong start” to the year. The numbers bear this out. Revenue and adjusted pre-tax profit climbed 41% (to $122m) and 23% (to $16m) respectively over the six months to the end of March. In other news, net debt pretty much halved to just over $44m. The interim dividend was also hiked by 30%.

Perhaps most importantly for would-be investors, Avon said that it was making “good progress” with regard to sorting out the delays in gaining product approval for its body armour programmes. This is partly what caused the shares to dive late last year. 

Thanks to a 46.5% jump in orders, the mid-cap — which will shortly change its name to Avon Protection — thinks it will deliver full-year numbers as expected. Revenue visibility going forward has also been described as “excellent“. That’s more than you can say for other growth stocks. 

Avon is still 35% below the share price high it hit back in December. Again, like AG Barr, I’m not expecting this gap to close overnight. However, I do think those with time on their hands will be rewarded eventually.

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Paul Summers owns shares of AG Barr. The Motley Fool UK has recommended AG Barr and Avon Rubber. 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.

Buying into Fever-Tree after the stock market crash at 935p a share and selling now would net you a cushy 156% return. 

Fever-Tree, like many of its AIM-listed peers, rides the waves of stock market volatility. The current trend is upwards, so why realise that pleasing return now?

Fever-Tree is a growth stock slowing down

Quite simply, Fever-Tree Drinks is a growth stock slowing down. Historically, the impressive stock price performance reflects the market’s expectations for the carbonated mixers supplier.

Until 2019, the company’s revenues, profits, and assets were increasing year on year and the market loved it. But, growth stocks can’t climb forever at the same rate.

Indeed, in 2019, a 10% rise in revenues did not translate into growing profits as increased costs and reduced domestic sales took their toll. Despite a strong balance sheet, Fever-Tree wasn’t meeting analyst expectations, sharply depressing the share price, and slowing the growth curve. 

Understandably, every investor wants above-average returns, and many will view growth stocks, like Fever-Tree, as a means of achieving this. But past growth is not an indicator of future growth and companies with good records usually sell at high prices. 

An investor can be right about a firm’s prospects but also pay too much for a stock, lowering returns on their purchase.

Fever-Tree Drinks share price is expensive

Fever-Tree Drinks currently trades around 2,394p. Many share price websites will show a price-to-earnings (P/E) ratio for Fever-Tree, around 47. This ratio takes the current price of the share and divides it by 2019’s earnings per share (EPS) of 50.3p.

Usually, a lower ratio indicates better value for money. However, if the year in question was unusually profitable, it’s easy to overestimate a company’s proper value. Using a multi-year average reduces the odds of overestimating the true value of a company.

Over the last five years, Fever-Tree’s average EPS is 35.5p, giving a massive P/E of 67, against an industry average of 22. I think Fever-Tree Drinks is vastly overpriced, even before considering market conditions.

Fever-Tree faces market uncertainty

45% of Fever-Tree’s revenues come from ‘on-trade’ sales, meaning they arise from pubs and bars where alcohol can be sold to drink on-premises. It’s not yet clear what will happen to the pub trade in the short term due to the government’s coronavirus fears.

In addition, Fever-Tree’s artisan products, innovative at first, are now facing stiff competition from the likes of Cobell and other mixer manufacturers. Unless the firm can carve itself a new niche, it’s growth curve will flatten further.  

Also thinking this way is fund manager Nick Train. His fund bought Fever-Tree for under 1,400p, not long after its sharp share price plunge earlier this year. He notes that the company needs to be “about more than tonic” and is eyeing stateside growth potential in ginger ale and soda water products. 

There is a definite future for Fever-Tree; its solid balance sheet should sustain the company through short-term trouble. 

However, its shares are too risky to buy at current prices. Upwards momentum for the stock makes it a good time to sell. I’d buy it again once the market adjusts. Just like Nick Train.

The post Fever-Tree Drinks share price: Why I’d sell today appeared first on The Motley Fool UK.

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Rachael FitzGerald-Finch has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

I’m not so sure. Before explaining why, let’s look at today’s interim results from the company — originally intended for release in mid-May. 

Revenue hit

Of course, a lot of this morning’s numbers won’t really matter all that much since they only reflect trading in the 26 weeks to 28 March – not long after the UK went into lockdown.   

Nevertheless, at £510.5m, revenue was almost 8% down compared to the same period in the previous year. Underlying pre-tax profit was even worse, tumbling almost 72% to just £9.4m. This was despite sales to the end of February being “broadly in line” with the previous year. 

To its credit, the company has done what it can to minimise the impact of the lockdown on its finances. Expenditure has been slashed and 93% of its staff have been furloughed, with the remainder taking a 20% hit to their salaries. It’s also made use of government grants and reliefs where possible. 

Taking all this into account, what are the arguments in favour of taking a stake now?

Glass half full

First, it seems at least some UK drinkers are desperate for pubs to reopen. As a result, the idea that revenues may bounce back seem logical. Whether this happens in practice is something entirely different, of course.

Second, the recently-announced deal to combine its brewing business with Carlsberg UK should allow management more time to focus on its pubs and accommodation. 

It’s also good for its finances. Assuming the deal goes through, Marston’s will have a 40% stake in the new company. It will also receive a cash payment of £273m, which can be used to reduce debt.

Third, it’s worth highlighting, as Marston’s did today, that its pub estate is mostly freehold and located outside city centres. The fact that nine out of 10 of these pubs have outside space could prove very important as drinkers adapt to the new ‘normal’. 

Last, it’s certainly possible the company could actually grow market share as more competitors go out of business.

Glass half empty

On the other hand, there are some solid reasons for continuing to give Marston’s a wide berth for now. Another round of the coronavirus can’t be ruled out. And while a second lockdown seems unlikely, this would be a nightmare for an already-wounded industry.

Even if a second wave is avoided, the psychological impact of the virus could prove a drag on earnings for a while.

In addition to all this, you have a number of more general issues facing the pub industry. These include rising costs and the fact that an increasing number of us, particularly young people, are choosing to ditch alcohol completely.

The great unknown

As investors, we’re told to be “greedy when others are fearful.” As profitable this strategy has been for investing legend Warren Buffett, I’m not feeling the urge to snap up Marston’s right now. Even if the share price is still roughly 50% below where it was at the start of 2020.

With such an uncertain outlook — and no dividends to tide investors over — this is one for the watchlist at best.

For me, there are far less risky ways of making money in the market. 

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Marstons. 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.

Based on this rather brief statement (and in contrast to one of its peers), it would appear the FTSE 250 constituent is holding its own.

Confident outlook

Revenue came in at £360.1m over Q3 — a fall of 1.5% at constant currency compared to the same period in 2018.

Geographically, performance was mixed. Sales grew in Britain, despite the market “declining in value and volume” as a whole over the three months to 7 July. Oversea revenue growth also continued to be “solid“, but the French and Irish markets showed signs of “further softening since the half-year.”

While today’s statement hasn’t seen the shares fizz higher, the fact the company is still confident of meeting analyst forecasts for the full-year in spite of “a more challenging backdrop” may be considered something of a victory for holders. Especially after what happened over at Irn-Bru-maker AG Barr last week.

To recap, the latter’s share price dived on 16 July after it reported that sales and profits would likely drop 10% and 20%, respectively in the current financial year as a result of poor weather and issues with some of its brands such as Rockstar and Rubicon.

While management certainly can’t be blamed for the lower temperatures in 2019, it’s clear Barr’s decision to increase prices after focusing on raising volumes in 2018 has backfired. Steps to resolve the brand-related issues have apparently been taken, but it will take a while to see the benefits.

To rub salt into the wound, interim results from AIM-listed peer and Vimto-maker Nichols were far more reassuring. Last week, the business reported growth in both the UK and overseas with revenue and pre-tax profit up by 10.2% and 2%, respectively. 

In my opinion, Nichols represents the standout quality pick of the three since it consistently generates the highest operating margins and returns on capital employed and also boasts a net cash position.

That said, its valuation of 23 times forecast earnings makes it the most expensive stock to buy. Despite a long history of increasing cash payouts to holders, the 2.3% yield is unlikely to whip dividend seekers into a frenzy either.

As things stand, AG Barr is the least investable, in my view. At 21 times forecast earnings, the shares still aren’t cheap enough, considering the uncertain outlook and the likelihood of further exceptional costs being announced later this year. On the flip-side, I suppose any further pressure on the share price could make the company an attractive takeover target. 

For value and income hunters, however, Britvic looks the clear winner. The stock trades at just 15 times earnings FY19 and comes with a best-in-class forecast yield of 3.5%, covered almost twice by profits.

Considering its market-cap, big portfolio of brands, and the fact it holds the licence to distribute Pepsi and 7Up in the UK and Ireland, I also think the company could be the most defensive option for those concerned by the volatility of smaller stocks and the susceptibility of these firms to things outside of their control.

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Paul Summers owns shares in Nichols. The Motley Fool UK owns shares of and has recommended Britvic. The Motley Fool UK has recommended Nichols. 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.

Following a hugely successful few years, there have been suggestions from some analysts that the UK’s recent love for gin is now beginning to fade and that the £2.7bn cap would likely struggle to better last year’s sales in the sweltering summer of 2018. Questions were also being raised regarding Fevertree’s decision to move into the potentially-highly-lucrative but notoriously difficult-to-crack US market.

This morning’s numbers would seem to give some credence to these concerns.

Losing fizz? 

We’re certainly not talking a disaster here. Indeed, Fevertree reported “continued growth” in all four of the regions in which it operates over the first six months of 2019 including “very encouraging momentum” in North America. 

With regard to the UK, the company reflected that it had “further strengthened” its position as the top brand in the mixer category, despite the relatively poor weather over the last few months. It also reported securing “significant off-trade distribution wins” in Europe and an “acceleration of growth” in Australia and Canada.

As good as all this sounds, however, the actual numbers were somewhat less impressive.

The 13% rise in revenue to £117.3m over the first half of 2019 was slightly lower than some analysts were expecting and far below the 45% achieved over the same period last year. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) came in at £36.7m — a rise of 8% but, again, a far lower rate of growth than that reported in 2018 (+35%). 

CEO Tim Warrilow remains bullish. Looking to the future, he said that Fevertree’s focus on long mixed drinks was “gathering momentum and starting to win share from beer and wine”.

Mr Warrilow went on to say that the company’s range of products, connections with spirit makers, the strength of its brand and the growth of its distribution network made management confident of the “significant global opportunity that lies ahead” for Fevertree.

Indicative of this belief, the interim dividend was hiked 23% to 5.2p per share.

Still expensive

Fevertree’s share price was down around 5% in early trading, erasing the gains seen yesterday in anticipation of today’s results. It would seem that the company’s prediction that trading would only be in line with full-year expectations this time around was deemed not enough for a good number of its growth-focused owners.

Current analyst expectations of 58.3p per share for FY2019 leave the stock on a forecast price-to-earnings (P/E) ratio of roughly 37. That’s certainly not as high as it once was but it remains pretty frothy considering the firm’s near-term outlook.

Sitting on the sidelines

This is, without doubt, a great business. Many others would kill for Fevertree’s fat profit margins, huge returns on capital employed and £104.1m net cash position. 

But while the shares have almost halved from the all-time high hit last September, today’s numbers make me inclined to wait for the stock to fall even further before taking a position.

No stock is worth buying at any price and, right now, the rate of progress being made is at odds with the lofty valuation, in my view.

Fevertree remains on my watchlist. 

The post This top growth stock’s share price has almost halved in less than a year. Time to buy? appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

With this in mind, let’s put branded soft drinks giant Britvic (LSE: BVIC) head-to-head with AIM-listed Nichols (LSE: NICL). Which company offers more investing fizz for your money? 

Strong results

Wednesday’s full year results from Britvic will no doubt please those already invested. Revenue was up 10.1% to £1,431.3m (with like-for-like sales rising 0.4%) and profits after tax increased by a very healthy 10.3% to £114.5m. In terms of strategic highlights, the company reported another strong year for its carbonates portfolio (Pepsi Max, 7UP and Tango), an excellent first year of trading in Brazil and continued progress in the US and France, particularly with its Fruit Shoot offering.  

In addition to confirming that the company was trading in line with expectations, CEO Simon Litherland also reflected that Britvic intends to tackle rising input costs through “a combination of revenue management activities and internal cost saving initiatives“. This sounds pretty good to me, especially given the likelihood of a sharp rise in inflation over the next year or so. The market likes it, too. Shares were up 4.6% in early trading.

Despite this rise, shares in Britvic still look fairly cheap on a forecast price-to-earnings (P/E) ratio of 12. True, it hasn’t been able to generate the same level of earnings growth as other beverage companies (which may have contributed to its gradually declining share price over the last year). However, the Hemel Hempstead-based business has managed decent returns on capital employed over the last four years. Its cash flow levels still look reasonable and, with a forecast dividend yield of just under 4.5% easily covered by earnings, there’s lots for income investors to like too. 

But how does the company compare to industry peer Nichols?

Fantastic fundamentals

With a market cap of just £586m, the Newton-Le-Willows-based business is only just over a third of Britvic’s size. Nevertheless, with a portfolio including the ever-popular Vimto, Sunkist and Levi Roots, Nichols shows all the characteristics of a fine business with consistent annual increases in earnings per share, outstanding levels of return from capital and high operating margins.

In sharp contrast to Britvic’s net debt of £550m, Nichols also has a net cash position of almost £33m. This should appeal to those investors who like companies with particularly robust balance sheets. 

On fundamentals alone, Nichols would get my vote. That said, it’s understandable if value-conscious investors are more drawn towards Britvic due to its lower valuation (shares in the former trade on a forecast P/E of 23). There’s also the fact that Britvic has a larger portfolio of drinks, giving investors a degree of protection if one or a few brands suffer declining sales. Whether this happens as a direct result of the impending sugar tax is open to debate.

Personally, I think the overall impact of new policies on earnings will be fairly negligible and that Nicholls and Britvic are capable of adapting without too much fuss, particularly as both have significant exposure to international markets. 

The post Better buy: Britvic plc or Nichols plc? appeared first on The Motley Fool UK.

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Paul Summers has no position in any shares mentioned. The Motley Fool UK has recommended Britvic. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

A tasty dividend treat

While yields at drinks giant Diageo (LSE: DGE) have hardly set the world on fire, I believe the business remains an appetising selection for those seeking dependable dividend growth.

Indeed, despite the business having swallowed chunky earnings dips during each of the past two years, Diageo has remained committed to lifting the dividend. As a result, payments have advanced at a compound annual growth rate of 8.7% during the past five years, a very decent performance given the circumstances.

And while the murky earnings outlook at many of the London Stock Exchange’s largest constituents are causing dividends to fall like dominoes, I believe Diageo’s sterling bottom-line prospects make it a much more secure income selection. Indeed, labels like Johnnie Walker whisky and Guinness stout carry strong brand recognition and formidable pricing power that keep revenues riding higher regardless of wider market pressures.

My bullish take on Diageo’s dividend prospects are backed up by current City projections. The business is expected to lift the shareholder reward to 58.4p per share in the 12 months to June 2016 alone, up from 56.4p last year and backed-up by an anticipated 1% earnings advance.

Even though a 3.1% yield continues to lag the FTSE 100 forward average of around 3.5%, I fully expect this reading to keep on improving. That should happen as profits from Diageo’s critical North American marketplace, not to mention those from emerging markets, gallop higher in the years ahead.

A terrific income transmitter

Like Diageo, I believe that Vodafone’s (LSE: VOD) dividend profile should keep on improving as revenues head higher in established and developing economies alike. On top of this, the receding impact of Vodafone’s colossal £19bn Project Spring organic investment programme also bodes well for investor payouts in the coming years.

Vodafone has pulled out all the stops to resuscitate the fortunes of its critical European marketplace, a region previously suffocated by regulatory hurdles and immense competition.

But with vast sums having been ploughed into improving its data and voice services, and acquisitions like Kabel Deutschland enhancing its cross-selling opportunities in the ‘quad play’ entertainment market, demand for Vodafone’s products is steadily stomping higher again.

Thanks to its robust cash flows and positive earnings outlook, Vodafone is now expected to lift the dividend yet again for the year to March 2016, despite analyst forecasts of a third consecutive annual earnings loss – a 12% bottom-line  slide has been anticipated.

Indeed, a reward of 11.22p per share last year is now predicted to rise to 11.5p for both fiscal 2016 and 2017, yielding a market-bashing 5.3%. With continental sales taking off again, and demand in development markets heading through the roof, I fully expect dividends to march higher beyond next year.

The post Why Dividend Hunters MUST Have Diageo plc & Vodafone Group plc In Their Sights! appeared first on The Motley Fool UK.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.