Diageo (DGE)

[ADrunkenMarcus]

Buybacks (or rather, the reason for stopping them) were specifically addressed in the results....

They were. Nonetheless, the wisdom of repurchasing shares at some of the higher prices seen in recent years was already being questioned before COVID-19. Nick Train, I think, for one, although I cannot find the reference.

Best wishes

Mark.

[ADrunkenMarcus]

Lucky you! They have certainly done well and I, too, have done much better with modest yielders, where the dividend and s.p. increased from year to year. However, I am finding that some of those are nosediving in the current circumstances. Hope that doesn't happen to you.

I wouldn't mind. If Diageo got super cheap and offered a 6 percent free cashflow yield then I would jump at the chance to top up.

Best wishes

Mark.

[Dod101]

Lucky you! They have certainly done well and I, too, have done much better with modest yielders, where the dividend and s.p. increased from year to year. However, I am finding that some of those are nosediving in the current circumstances. Hope that doesn't happen to you.

I wouldn't mind. If Diageo got super cheap and offered a 6 percent free cashflow yield then I would jump at the chance to top up.

Best wishes

Mark.

But then you would be as bad as Diageo itself, quite possibly buying at exactly the wrong time because that yield, given their history, would be a clear indication of something far wrong. Companies often get their timing wrong for buybacks because at just the time when they should be making them (when their shares are cheap) they cannot afford to. All of the experiences in the last 6 months has indicated the folly or at least the danger of high borrowings. I think more than anything else that is the lesson to take away. And yer survival should be the first priority.

For instance, Pizza Express is closing a lot of its branches and it appears to have little to do with Covid but a lot to do with over borrowing and if they are in trouble now with interest rates where they are........Covid will probably get the blame though.

Dod

[ADrunkenMarcus]

But then you would be as bad as Diageo itself, quite possibly buying at exactly the wrong time because that yield, given their history, would be a clear indication of something far wrong.

That does not necessarily follow. Many good companies get marked down to an extent when there are steep market falls and panics. (If I remember rightly, you could get over 4.5 percent as a dividend yield on Diageo back in c. 2009.) An example among my current holdings is Kainos, which plunged during March/April 2020 and is now back far above its previous all-time highs. I think Diageo is suffering at the moment because bars have closed and people are not socialising but it is not fundamentally a troubled company. MasterCard is suffering, too, from fewer in-person card transactions but they are still buying back shares. They can do so as they have a much stronger balance sheet.

I've typically fed large chunks of capital into the market during periods of heavy falls, such as 2009, 2011 and then again in April 2020. On the basis of the number of income units, my dividend growth portfolio's size increased over 10 percent this year.

Best wishes

Mark.

[monabri]

I've typically fed large chunks of capital into the market during periods of heavy falls, such as 2009, 2011 and then again in April 2020. On the basis of the number of income units, my dividend growth portfolio's size increased over 10 percent this year.

Best wishes

Mark.

I think you've got this investing lark sussed...well done. Getting rich slowly!

[Dod101]

I think I agree with Monabri. I obviously bought Diageo at its high water mark on 20 August 2019 at £34.975. By January 2020 (near the high water mark for the market) it was £31.60 and it dropped to around £24 at its nadir in March and since then has been around £28. It certainly went off the boil in the second half of last year and has not recovered so I am not very happy with it and its miserable dividend. However I suppose I will just keep it and see what happens. Cannot win them all and it is not going bust. Just shows how important timing can be but of course I would be the first to acknowledge that 12 months is much too short a period to consider.

Dod

[ADrunkenMarcus]

I've typically fed large chunks of capital into the market during periods of heavy falls, such as 2009, 2011 and then again in April 2020. On the basis of the number of income units, my dividend growth portfolio's size increased over 10 percent this year.

Best wishes

Mark.

I think you've got this investing lark sussed...well done. Getting rich slowly!

You can accelerate your wealth accumulation by increasing your capital being put to work in new investments when asset prices are low. Particular highlights were picking up Renishaw at 835p in 2011 (up 486%) and PayPal at $122 in 2020 (up 62%). However, I do think the Diageos of this world are really quite incredible if you have the patience to hold them over a long period of time and benefit from 8-10 percent CAGR.

Best wishes

Mark.

[Dod101]

You can accelerate your wealth accumulation by increasing your capital being put to work in new investments when asset prices are low. Particular highlights were picking up Renishaw at 835p in 2011 (up 486%) and PayPal at $122 in 2020 (up 62%). However, I do think the Diageos of this world are really quite incredible if you have the patience to hold them over a long period of time and benefit from 8-10 percent CAGR.

Any share is entitled to be called wonderful if you can benefit from a CAGR of 8-10 percent.

Dod

[Breelander]

Particular highlights were picking up Renishaw at 835p in 2011 (up 486%) and PayPal at $122 in 2020 (up 62%). However, I do think the Diageos of this world are really quite incredible if you have the patience to hold them over a long period of time and benefit from 8-10 percent CAGR.

2011 was, as it turned out, a good year to buy most things. It was the year I finished off building my HYP, including adding Diageo at 1181.88p (up 125%) and Unilever at 1830.69p (up 157%).

[dealtn]

No doubt I will look back at this when the capital return programme gets re-instated and they start buying their shares again at a higher level somewhat bemused that like most programmes they operate a buy high - stop low policy!

I noted DGE isn't repurchasing shares at the moment, despite the price being cheaper. They'd been busy buying back shares in the low £30s rather than mid £20s as we have now. Companies are bad at doing share buybacks.

Buybacks (or rather, the reason for stopping them) were specifically addressed in the results....

On 9 April 2020 Diageo announced that it had not initiated the next phase of the three-year programme and that it would not do so during the remainder of fiscal 2020.

At 30 June 2020 the leverage ratio, calculated as adjusted net debt to adjusted EBITDA, was 3.3x and Diageo anticipates leverage to be above the target range of 2.5-3.0x through the year ending 30 June 2021. As such Diageo does not currently plan to reinitiate the programme until the leverage ratio is back within the target range.

Yes, and when they are reinstated I will be bemused that Directors use a metric such as EBITDA, and in a ratio with debt, to make such decisions, when it is the cash flow account that is a better measure. Non-cash extraordinary hits to earnings are driving a change in behaviour. The outcome of which will be suspending buybacks, or investment when prices are low, and reinstating when they are higher.

[monabri]

My next top up when ITI Crapital Ltd sort themselves out!

[idpickering]

Diageo issues trading commentary ahead of AGM 2020

Ivan Menezes, Chief Executive, commented:

"We have made a good start to fiscal 21, with sequential improvement in our performance across all regions, driven by strong execution, robust demand in the off-trade channel and the gradual re-opening of the on-trade channel in most markets. The pace of recovery from the Covid-19 pandemic and easing of government restrictions varies by market.

Our US business is performing strongly and ahead of our expectations, reflecting resilient consumer demand and the spirits category continuing to gain share within the total beverage alcohol market. Increased retailer confidence is resulting in some re-stocking in the off-trade channel. The on-trade channel is now open in all states, with some capacity restrictions.

In Europe, off-trade demand remains robust and the on-trade channel has largely re-opened with the easing of lockdown measures in most countries, although the risk of additional restrictions remains where infection rates are worsening. In China, the on-trade channel continues to recover, although larger banqueting occasions are returning more slowly. While the on-trade has also begun to re-open in Africa, India and Latin America and the Caribbean, we expect the pace of recovery in those markets to be more gradual. Travel retail continues to be severely impacted.

Full item here;

https://www.investegate.co.uk/diageo-pl ... 00072191A/

[Dod101]

is up more than 10% today presumably because the market expects Biden to reduce the import duty that Trump imposed. I have not seen it at over £30 for quite some time. Have I missed some news?

Dod

[PinkDalek]

is up more than 10% today presumably because the market expects Biden to reduce the import duty that Trump imposed. I have not seen it at over £30 for quite some time. Have I missed some news?

Dod

Quite possibly.

https://www.bbc.co.uk/news/health-54873105

[Dod101]

Thanks PD. Seems all a bit premature. Better not get too excited about it. The markets need to calm down. Even if Biden is unlikely to be very pro business, I suspect that the apparent settlement there will also have helped sentiment.

Dod

[Arborbridge]

is up more than 10% today presumably because the market expects Biden to reduce the import duty that Trump imposed. I have not seen it at over £30 for quite some time. Have I missed some news?

Dod

Isn't the price up because hospitality will, in the end, return to normal, and therefore Diageo sales will be lifted?

Arb.

[SalvorHardin]

is up more than 10% today presumably because the market expects Biden to reduce the import duty that Trump imposed. I have not seen it at over £30 for quite some time. Have I missed some news?

It's the news about the success of Pfizer coronavirus vaccine in phase 3 trials, with a very large sample, which is highly significant. Back in July the British Government had preordered some 30 million doses of this vaccine, but the Oxford vaccine was getting all the publicity so this went under many people's radar.

I arrived home just after midday from a walk and saw that a lot of my shares had jumped by over 5% whilst I was out. A move like that means that some serious news has hit the market and sure enough when I turned on the TV it was wall-to-wall vaccine coverage.

This was shortly followed by my texting almost everyone in my mobile phone contacts book to pass on the news.

My biologist friend, who's more of a glass half-empty person, says that it is "excellent news", "very positive" but "not a total magic bullet". The key point is that the success in producing a vaccine like this it shows that the virus can now be brought under control, after allowing for the time and logistics needed to deploy it. We won't be back to normal by Christmas, more like March/April in the best case scenario. As we know, stockmarkets are a great mechanism for incorporating new news into prices - today is a great example of this.

"Few scientists would have expected a first-wave COVID vaccine to be 90% effective. Many had said that a jab that prevented just 50% of cases would be a gamechanger."

https://news.sky.com/story/coronavirus-race-for-a-vaccine-is-in-the-closing-stages-and-we-now-have-a-thoroughbred-12128519

Diageo up 12.5% as I type this. Wetherspoons is up by 20.7% (it is much more significant news for pubs)

[Dod101]

Thanks for the additional flesh on the bones SH. I do not really watch things that closely. It is though a pleasure to see this development. It surely gives us some light at the end of the tunnel.

Just taken a look at my holdings. Happy days are (almost) here again. Quite some jump!

Dod

[Lootman]

Diageo up 12.5% as I type this. Wetherspoons is up by 20.7% (it is much more significant news for pubs)

Carnival Cruiselines is up by one third, airlines up 15%-20%, energy up over 10%.

Pfizer is "only" up 7% though.

Yes, it is the virus news and not anything company-specific.

[Bouleversee]

Pfizer will, like AZN, have done the work on a not-for-profit basis initially so a big jump not expected initially. Pity they beat AZN (down 1.22%) and GSK (up 2.16%) to it as I had topped up my holdings in both. I dare say they will all be producing a vaccine in due course, however.