Diageo Plc was founded in 1997 following the merger of Guinness Brewery and Grand Metropolitan. A new chapter had started for a company that traces its roots way back to 1759, serving revellers around the world with a range of iconic alcoholic beverages. Diageo is a true global giant, with the company selling over 200 brands in over 180 countries. The company also has over 150 production sites located in over 30 countries. Diageo has a rich history and has become a trusted custodian of popular brands of spirits, beer, and wine.
For most investors, Diageo stock is a solid anchor investment. And it is easy to see why! Diageo has a successful business model and an impressive track record in the lucrative consumer goods sector. It has an amazing portfolio of top-performing and highly valuable brands, most of which are market leaders in their respective categories. The company has a wide geographical reach, and as a cash-heavy business, it is able to perform quick acquisitions of promising or competing companies. Some of Diageo’s deals include major stakes in LVMH Moet Hennessy and Seedlip. Diageo’s top brands include Guinness, Baileys, Smirnoff Vodka, Johnny Walker, Captain Morgan, Ciroc, and Crown Royal.
Diageo has a primary listing on the London Stock Exchange, where its shares trade under the ticker symbol DGE. DGE is a component of the FTSE 100 index. The company also has a secondary listing on the New York Stock Exchange, trading under the ticker symbol DEO.
DGE Stock History
Diageo has never implemented a stock split since its 1997 merger. DGE has had an impressive stock history, and its price is quoted in pence on the LSE.
The DGE stock traded at circa 500p at the turn of the millennium, and it has since largely sustained an upward trajectory, reflecting the positive fundamentals of the company. The stock gradually edged higher and settled comfortably above 1000p by early 2007. The stock then displayed resilience during the 2007/8 Great Recession, slightly drifting lower to a temporary trough above 700p by March 2009. It then embarked on a rally that saw it breach the 2000p barrier in early 2013. DGE then took a breather before picking up momentum in mid-2016 and rising to above 3000p in early 2019. A brief correction was then fast-tracked by the effects of the 2020 COVID-19 pandemic, with Diageo becoming one of the worst-hit companies as restaurants and bars remained closed the world over. These concerns saw investors drive the stock to lows of below 2500p by late March 2020. The stock, however, recovered as economies opened up and has since managed to print an all-time high above 3570p in 2021.
Diageo has been a generous dividend payer, and its stock has consistently proven its anchor status. DGE is a lucrative stock delivering long-term value appreciation as well as consistent periodic income in the form of generous dividends.
How to Trade Diageo Stock?
Here are the factors to consider when trading DGE stock:
- Legislative and Taxation Policies
The sale and consumption of alcohol both face complex and constant legislative and taxation threats in various jurisdictions. As a global leader in alcoholic beverages, Diageo has to navigate these threats that range from a general tendency of governments to tax and legislate more on products perceived to pose health risks to citizens. Additionally, Diageo also faces the threat of counterfeit products that leech off the popularity of their brands, and it requires strong legislation to curb this risk.
- Cost Pressures
Diageo has a massive global reach, and this exposes the company to unique cost pressures that can impact its bottom line. With production sites scattered in multiple countries, Diageo has to deal with cost challenges, such as fluctuating prices of raw materials, commodities, labour, forex, licenses, as well as other legal and distribution fees. The ability (or lack thereof) of the company to use creative methods to manage the high costs, could easily impact the margins of the business.
The stability of profits in the alcoholic beverages sector has only encouraged the resolve of competitors. Diageo was for a long time the top company in its industry, but it surrendered the title to China’s Kweichow Moutai. Other notable Diageo’s competitors include Sab Miller, UB Group, and Anheuser Busch. Furthermore, competition also comes from local brewers and distillers in various jurisdictions.
- Lawsuits and Negative PR
Diageo sells ‘sin products’ and the company has often easily generated negative PR and attracted controversial lawsuits all around the world. In recent years, Diageo has been accused of unethical practices, such as tax avoidance schemes, misleading marketing messages, and promotions, dishonourable lobbying, as well as bribery and corruption scandals. Some of these have led to lawsuits that have required huge settlements, which further weigh heavily on DGE shares.
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