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MR MONEY MAKER: Diageo might just lift your profits

MR MONEY MAKER: A wee dram of drinks giant Diageo might just lift your profits

Raising a glass: Diageo makes Johnnie Walker

What’s happening? 

Can we finally say to ourselves that just maybe the worst of the pandemic is over? The first thing you can do to celebrate is to buy a drink, and the second? 

You could buy shares in beverages giant Diageo, which makes Johnnie Walker. 

Why Does It Matter? 

A good rule of thumb is never to buy any investment whilst imbibing alcoholic products, so don’t dive in if you have been toasting the return of some of our liberties. 

However, there are some very compelling reasons, with sober thought, to consider it seriously. Diageo operates in 180 countries and makes products in 140 of them. Until recently it was the world’s largest distiller, and still retains the crown of the world’s largest producer of Scotch whisky.

From the unpronounceable to sometimes (to my taste) the undrinkable, Diageo owns an astonishing array of marques and brands – including Smirnoff, Captain Morgan and Baileys. For those of us of a certain age, we would know this business as the old Guinness company, but that brand would hardly reflect its global strength and capacity.

What Should I Do? 

Subject to the re-introduction of Prohibition, this company’s favourite product, alcohol, is unlikely to find itself going out of fashion in the short term. 

I would ask therefore that you regard this company as a manager and developer of a broad range of brands. This means that it can rely on a wide base of income streams and not just a bet on a single fashion fad in the extremely competitive drinks world. 

Obviously the pandemic had a dramatic effect as all the pubs and restaurants were shut down, however, that did not prevent many of us from just buying directly. 

The company has been generating cash and it has already announced that it will return around £4.5billion to shareholders over the next three years. This will be through a combination of buy backs of its own shares and some more generous dividends.

Any Suggestions? 

Despite all this good news, the price is not at an all-time high. That was in August 2019. It has risen strongly since last year’s nadir as the economies shut down, but in my view the outlook is very positive. 

If you want to take a broader view then the Xtrackers Stoxx Europe 600 Food & Beverage UCITS ETF (XS3R) passive fund is a low cost choice. Hopefully, you will enjoy the investment and raise a glass to your profits. Slàinte mhath – or cheers, for Sassenachs. 

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