Should Diageo plc (LON:DGE) Be Part Of Your Dividend Portfolio?
A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Diageo plc (LSE:DGE) has returned to shareholders over the past 10 years, an average dividend yield of 3.00% annually. Should it have a place in your portfolio? Let’s take a look at Diageo in more detail. See our latest analysis for Diageo
5 checks you should do on a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Does it pay an annual yield higher than 75% of dividend payers?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has it increased its dividend per share amount over the past?
Can it afford to pay the current rate of dividends from its earnings?
Will it be able to continue to payout at the current rate in the future?
How well does Diageo fit our criteria?
The current trailing twelve-month payout ratio for the stock is 49.62%, which means that the dividend is covered by earnings. Going forward, analysts expect DGE’s payout to remain around the same level at 54.06% of its earnings, which leads to a dividend yield of 2.81%. Moreover, EPS is forecasted to fall to £1.23 in the upcoming year. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again. In terms of its peers, Diageo has a yield of 2.54%, which is high for Beverage stocks but still below the market’s top dividend payers.
Next Steps:
Considering the dividend attributes we analyzed above, Diageo is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three pertinent aspects you should further examine:
Future Outlook: What are well-informed industry analysts predicting for DGE’s future growth? Take a look at our free research report of analyst consensus for DGE’s outlook.
Valuation: What is DGE worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether DGE is currently mispriced by the market.
Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
