Diageo Raises Dividend by 8%

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LONDON -- Diageo (LSE: DGE.L  ) (NYSE: DEO  )  posted a small increase in full-year profits but it has hiked its dividend by 8% to 43.5 pence per share. The world's biggest producer of spirits said: "Diageo is a strong business, getting stronger and the results we released this morning show that very clearly."

Chief Executive Paul Walsh added: "We have increased our presence in the faster growing markets of the world, through both acquisitions and strong organic growth."

Those faster-growing markets include Asia-Pacific, which saw an 8% increase in sales, as well as a 19% rise in revenue in Latin America and Caribbean. Its North America market also performed strongly, but Europe, which saw a 1% dip in both sales and volume, fared less well. Andrew Morgan, president of Diageo Europe, said:

The economy remains very uneven in Europe. We continue to deliver substantial sales and profit growth in Europe's emerging countries of Russia, Eastern Europe and Turkey, as well as a good performance across Northern Europe. Clearly though, Southern Europe remains challenging.

Diageo did provide an upbeat guidance for the current year. It said: "Our confidence in the achievement of our medium term guidance is underscored by the 8% recommended increase in our final dividend."

Currently, shares in Diageo -- which rose 0.2% to 1,684 pence -- are valued at 16 times prospective earnings. This looks a tad expensive given that profits are only expected to grow modestly. Meanwhile, the dividend, although adequately covered, is unlikely to get income investors rushing to press the "buy" button.

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David Kuo does not own shares in Diageo. Motley Fool newsletter services have recommended buying shares of Diageo. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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10/20/2016 3:47 PM
DEO $108.27 Down -0.12 -0.11%
Diageo CAPS Rating: *****