We recently compiled a list of the 12 Best International Dividend Stocks To Buy Now. In this article, we are going to take a look at where Diageo plc (NYSE:DEO) stands against the other international dividend stocks.
Dividend stocks have been grabbing investors’ attention for a while now. According to JP Morgan, over the last two decades, global dividends per share have increased at an annual rate of 5.6%, but analysts expect this to rise to 7.6% in the future, driven by historically low payout ratios. During the 2020 pandemic, many companies cut dividends, but as earnings have recovered, especially in Big Tech and AI, dividends have not kept up. With payout ratios at 25-year lows, simply returning to normal could add 2% annual growth over the next five years.
After slowing down post-COVID, global dividend growth made a surprising comeback last year, increasing 8% and adding an extra $180 billion in payouts despite ongoing economic and geopolitical challenges. According to S&P Global, this was largely driven by record dividend initiations in US tech, European banks, Japan’s auto industry, and solid growth from China. Even oil and gas companies held strong despite market volatility. Looking ahead, experts predict global dividends will hold steady at $2.3 trillion in 2025.
Regionally, developed Asia, which includes Japan, Hong Kong, Australia, South Korea, and Singapore, is looking at a 3% rise in dividends this year. Europe, on the other hand, is expected to see a 3.4% decline. In emerging markets, the trends are mixed. Asia, led by China, India, and Taiwan, is on track for a 5% increase, while dividends in the Middle East and Africa could drop by 20%, mainly because Saudi Aramco’s special dividend program ended. Latin America is also expected to see a small dip of around 4%.
When it comes to sectors, banks and energy companies remain the biggest dividend payers. Banks are expected to distribute around $380 billion globally, but after four years of rapid 20% growth, they are now down to just 2%. Banks are playing it safe, waiting to see how interest rates move. Given this, we will take a look at some of the best international dividend stocks.
Our Methodology
For this article, we used the BlackRock International Dividend ETF to filter out dividend stocks listed on US exchanges but headquartered internationally. We focused on picking stocks that were most popular among hedge funds. The list below is ranked in the ascending order of Q3 2024 hedge fund sentiment, and dividend yields are mentioned as of February 11.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here)
A close-up of bottles of whisky and other alcoholic beverages from a winery.
Diageo plc (NYSE:DEO)
Dividend Yield as of February 11: 3.54%
Number of Hedge Fund Holders: 26
Diageo plc (NYSE:DEO) is a London-based global alcoholic beverage company that produces, markets, and sells spirits, beer, and non-alcoholic drinks. The company sells whiskies, vodka, gin, rum, tequila, liqueurs, and flavored malt beverages.
Diageo North America is investing $415 million in a new manufacturing and warehousing facility in Montgomery, Alabama, to solidify its supply network. Built on 360,000 square feet, the facility will increase production capacity for the company’s top beverage brands and support its North American and export operations. The project is expected to be fully operational by late 2025.
Diageo plc (NYSE:DEO)’s free cash flow rose by $125 million to $1.7 billion in the most latest quarter, mainly due to better working capital management. The company announced a $0.405 per share dividend for the half, keeping it flat from last year as a cautious move in the current market. Diageo’s sales for the six months ending in December 2024 dropped by 0.6% to $10.9 billion. A dip in sales, paired with uncertain trade conditions, led the company to withdraw its medium-term organic sales growth target of 5 to 7%.
Among the hedge funds tracked by Insider Monkey in Q3 2024, 26 funds were long Diageo plc (NYSE:DEO), compared to 31 funds in the prior quarter. William B. Gray’s Orbis Investment Management is the leading stakeholder of the company, with nearly 2 million shares worth $278 million.
Overall DEO ranks 11th on our list of the best international dividend stocks to buy. While we acknowledge the potential of DEO as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DEO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.