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During the last 12 months, the FTSE 100 index has risen by 20%, excluding money dividends. Over this era, it has overwhelmed the US S&P 500 (up 12.2%). But some Footsie shares have carried out very poorly in 2025, corresponding to beaten-down Diageo (LSE: DGE) shares.
Diageo broken
For many years, Diageo inventory has been a stalwart of the London inventory market. However since reaching report highs in 2021, this broadly held share has crashed by practically three-fifths.
On 31 December 2021, the shares closed at 4,036p, having soared when the world partied after Covid-19 lockdowns ended. Alas, this inventory hasn’t had a good yr since these good occasions.
On Friday, 7 November, the Diageo share value closed at 1,726.5p, valuing this alcoholic-drinks Goliath at £37.2bn — a fraction of its end-2021 market worth. Nevertheless, issues have been worse for shareholders, with the inventory hitting a 52-week low of 1,664p on 6 November.
After steep value falls, the shares are down 20.8% over six months and 26.2% over one yr. Even worse, they’ve plunged 34.7% within the final 5 years, among the many FTSE 100’s worst performers over these three intervals.
Disclosure: my household portfolio owns Diageo inventory, paying 2,780.8p a share in January 2023. Presently, we’re nursing a paper lack of 37.9% of our funding, excluding dividends — which we reinvest by shopping for extra shares. That’s one in every of our worst returns of the previous decade.
Dividend dilemma
Then once more, the above returns all exclude dividends, which have gotten more and more beneficiant from this FTSE 100 agency. At present, Diageo shares affords a money yield above 4.4% a yr — one of many highest within the Footsie.
Nevertheless, as a result of weaker revenues, margins, and earnings, this payout is thinly lined by historic earnings. The shares commerce on a a number of of 20.8 occasions earnings, delivering an earnings yield of 4.8%. Subsequently, Diageo’s dividend is roofed under 1.1 occasions by historic earnings — a marginal stage which may point out cutbacks to come back.
Boss battle
One other downside is that the famend maker of Johnnie Walker whisky, Smirnoff vodka, Baileys Irish cream, Tanqueray gin, Captain Morgan rum, and Guinness stout doesn’t have a everlasting chief government at current. Former CEO Debra Crew stepped down in July and has but to get replaced. Nevertheless, discovering the fitting boss is crucial, so Chair Sir John Manzoni is taking his time.
One other concern is that alcohol consumption is on a gradual decline. For younger adults, different actions competing with ingesting embrace social media, video video games, and authorized (and illicit) hashish. Additionally, President Trump’s greater US import tariffs have hit drinks corporations arduous.
With Diageo shares testing 10-year lows, this British enterprise appears to be enduring an ideal storm. However when there’s blood within the water, sharks begin circling. Therefore, I believe just a few prime private-equity companies is perhaps working the rule over Diageo to thrash out the financials of a takeover.
In abstract, this FTSE 100 inventory is firmly out there’s cut price bin proper now. The large query is: are Diageo shares a restoration play or a price lure? Solely time will inform, so we’ll hold our shareholding and await developments!
