I didn’t should look far to discover a high-profile FTSE 100 share buying and selling close to its 52-week low. There’s one in my portfolio, staring proper again at me, particularly world spirits large Diageo (LSE: DGE).

I like shopping for high UK blue-chips once they’re down within the dumps, because it’s a chance to seize them at a lowered price and bag a better yield in addition.

But it doesn’t assure success. Shares don’t fall for no motive. And there’s no assure they’ll robotically recuperate both.

Blue-chip discount

That applies to a giant title like Diageo too, which was one of the vital in style shares on the FTSE 100 for years. It was enterprise as ordinary till 10 November final yr, when the board warned of a shock drop in earnings throughout its Latin America and Caribbean market, which makes up roughly 11% of whole gross sales.

Diageo targets the premium finish of the drinks market however hard-up native drinkers have been buying and selling down to the rougher stuff. The Diageo share price crashed 16% in a single day, its largest one-day drop since 1987. Two weeks later, on 24 November, I purchased the inventory for two,872p, however jumped the gun.

Interim outcomes printed on 30 January confirmed a thumping 23% decline in first-half Latin America and Caribbean gross sales, down $310m. General, reported internet gross sales fell 1.4% to $11bn, with a overseas trade influence too.

Personally, I’m down 9.26% nevertheless it might be worse. Diageo shares are down 25.59% over 12 months. Ought to I seize the day and purchase extra?

In the present day, Diageo shares commerce at 18.09 instances earnings. Throughout their glory days, they traded nearer to 25 instances earnings. Its price-to-earnings ratio’s close to a 10-year low, as this chart exhibits.

Chart by TradingView

The yield’s a modest 3.2%, under the FTSE 100 common of round 3.7%. On the plus aspect, Diageo’s dividends are coated twice by earnings, and the forecast yield is 3.4%.

Dividend development restoration inventory

As the worldwide economic system struggles, gross sales aren’t abruptly going to choose up. Turning round Latin America and the Caribbean might show significantly onerous, aggravated by a list hangover because it’s sitting on a pile of unsold inventory.

It doesn’t assist that the pound’s strengthening, as this can dilute the worth of Diageo’s abroad earnings as soon as transformed again into sterling. Gen Z appears to be going simple on the alcohol too, in a generational shift.

There are grounds for optimism although. As soon as Diageo’s achieved with destocking, gross sales might decide up. As might earnings per share, which, as this chart exhibits, have retreated these days.

Chart by TradingView

On 3 July, dealer Citi predicted Diageo shares might re-rate by greater than 20% over the subsequent 12-months. That wouldn’t shock me one bit and I’ll kick myself if I don’t reap the benefits of right this moment’s lowered share price.

A screaming purchase? We’ll know extra tomorrow (29 July), when Diageo releases its This autumn earnings. However in the mean time, I feel it’s and I’ll add one other splash of the inventory to my portfolio the second I’ve the money.