The FTSE 100 is packed stuffed with dividend superstars. That’s my identify for firms which have constantly elevated their shareholder payouts for at the very least a few many years.

Weirdly, they’re hardly ever those with the most important yields. As an alternative, they sometimes supply a long-term story of small however regular dividend hikes and strong share price progress. Their share costs don’t all the time rise although. Spirits big Diageo (LSE: DGE) is a evident instance.

It has an excellent dividend report, mountaineering payouts yearly for greater than 25 years. The will increase haven’t been large, simply 2.32% a yr on common over the previous decade, however they’ve been reliable. The yield was sometimes under 2.5%, however buyers didn’t care as a result of the share price normally marched upwards.

Low spirits

Not any extra. The Diageo share price has crashed nearly 30% over 12 months. It’s now at a 52-week low, buying and selling round 1,933p, and down almost 50% in three years. It’s again to ranges final seen a decade in the past.

Issues started with a revenue warning in November 2023 as drinkers in Latin America and the Caribbean switched to cheaper native manufacturers, slightly than the premium spirits Diageo had centered on. Falling gross sales within the US and China added to the stress. Then got here commerce tariffs, with Mexican tequila and Canadian whisky caught within the crossfire. Forecasting income turned too difficult, so Diageo stopped making an attempt.

Even when President Trump hit pause on tariff threats, it did little to carry the gloom. Diageo shares have fallen one other 10% within the final month.

On 19 Might, Diageo launched third-quarter outcomes overlaying the three months to 31 March. Natural internet gross sales rose 5.9%, however that was largely as a result of “significant phasing benefits” that will reverse in This autumn. In Asia Pacific, shoppers stored downtrading.

Revenue nonetheless flows

Diageo estimated a $150m annualised hit from tariffs, however hopes to mitigate round half by cost-cutting and different strikes. Administration goals to ship $3bn in annual free money circulate and save $500m over three years. That ought to assist preserve its proud dividend report.

Regardless of all of the troubles, the board has elevated the dividend by 5% in every of the final three years.

As we speak, the yield has climbed to greater than 4%. That’s uncommon for Diageo, and nearly solely because of the falling share price. However it does make immediately a extra tempting entry level.

And in some unspecified time in the future, the shares might recuperate. Analysts are optimistic. They’ve pencilled in a median 12-month price goal of two,420p, 25% increased than immediately. Throw in that yield and buyers might see a complete return near 30%. Bear in mind, this can be a forecast, not a assure.

Dangerous restoration play

Diageo shares commerce at round 15 occasions earnings, which seems to be first rate worth. Throughout the glory years, they traded round 24-25 occasions.

Holding Diageo has been painful. There are longer-term threats, too. Youthful folks appear to be ingesting much less. Weight-loss medicine might cut back alcohol consumption additional.

I purchased after the November 2023 revenue warning, and have been kicking myself ever since. However with the yield up, valuation down and indicators of stabilistion, courageous buyers would possibly take into account shopping for. However they might need to endure extra ache first.