Diageo, the owner of Guinness, Johnnie Walker and Smirnoff, goes into the last month of 2025 looking more like a turnaround play than the sleepy defensive it used to be.
As of the close on 4 December 2025, Diageo’s London‑listed shares trade around 1,731p, giving the group a market value of about £38.5bn and leaving the stock roughly a third below its 52‑week high of 2,619.5p. [1] In New York, the ADRs (ticker DEO) last closed at about $92 on 3 December. [2]
At the same time, Diageo is paying out a chunky final dividend today, dealing with a downgraded outlook for fiscal 2026, and preparing to hand the reins to high‑profile turnaround specialist Sir Dave Lewis on 1 January 2026. [3]
Key facts on Diageo stock today (4 December 2025)
- LSE (DGE) close: ~1,731p
- Market cap: ~£38.5bn [4]
- 52‑week range: 1,664.5p – 2,619.5p (shares still c. 34% below the high) [5]
- ADR (DEO) price: about $92 per share (NY close, 3 December) [6]
- FY25 dividend: 103.48 US cents per share, equivalent to about 79.4p in sterling, paid in two instalments TS2 Tech+1
- Dividend paid today: final dividend of 62.98 US cents (47.91p) per share, with payment date 4 December 2025 [7]
- Trailing dividend yield: roughly 4.5–4.7% on the London line; forward estimates are closer to 5% thanks to the share price slide TS2 Tech+1
- Net debt: about $21.9bn, or c. 3.4× adjusted EBITDA after FY25 TS2 Tech+1
- Guidance for fiscal 2026: organic net sales flat to slightly down, organic operating profit growth only low‑ to mid‑single digit [8]
Share price performance: from FTSE favourite to underperformer
Diageo has spent much of 2025 in the market’s sin bin. Data from long‑term performance trackers show the stock down roughly 26% in 2025, after declines of 9% in 2024 and over 15% in 2023. [9] UK commentators have labelled it “the laughing stock of the FTSE 100” after the shares lost around a quarter of their value over the past 12 months. [10]
The slump reflects a cluster of issues:
- Two profit warnings in two years, centred first on excess inventory and demand weakness in Latin America and the Caribbean, then on softer trends in the US and China. [11]
- Slower spirits demand in key developed markets, including the US, as consumers trade down and drink less alcohol overall. [12]
- Tariff headwinds, with the company estimating a $150m–$200m annual hit to profit from US import duties and responding with a large cost‑saving programme. [13]
- Leadership upheaval, with former CEO Debra Crew stepping down in July 2025 after just two years in the role. [14]
Despite the bounce on the CEO announcement in November, Diageo shares remain more than 30% below last year’s levels according to several UK business press summaries. [15]
Final dividend lands: high yield, rising questions
For income investors, 4 December 2025 is payday. Diageo is distributing its final FY25 dividend of 62.98 US cents per share, equivalent to 47.91p, confirmed by the company on 20 November with today as the payment date. [16]
Combined with the interim 40.50 cents paid in April, that makes a total FY25 dividend of 103.48 cents, fractionally above the previous year in dollar terms. TS2 Tech+1 On today’s London share price, the trailing yield sits around 4.5–4.7%, while forward estimates cluster closer to 5% – unusually high for a global consumer‑staples leader. TS2 Tech+2Hargreaves Lansdown+2
However, the dividend now consumes a bigger share of earnings and free cash flow:
- FY25 pre‑exceptional EPS fell 8.6% year on year to 164.2 cents. [17]
- Hargreaves Lansdown data put FY25 dividend cover at about 1.6×, down from nearly 2× a few years ago. [18]
That backdrop, combined with net debt of $21.9bn and guidance for flat sales, has prompted some market commentators to ask whether new CEO Dave Lewis might eventually have to temper Diageo’s long‑standing progressive dividend policy. [19]
For now, though, the board has not signalled any cut, and the FY25 payout has been maintained.
New CEO: “Drastic Dave” Lewis steps in
The biggest structural news for Diageo shareholders is the appointment of Sir Dave Lewis, the former Tesco chief executive and Unilever veteran, as CEO and executive director, effective 1 January 2026. [20]
Lewis, nicknamed “Drastic Dave” for his aggressive cost‑cutting and turnaround work at Tesco, is being brought in to stabilise Diageo after:
- The sudden death of long‑time CEO Sir Ivan Menezes in 2023.
- A difficult two‑year spell under Debra Crew, marked by Latin American inventory mis‑steps and weakening growth in North America and Asia. [21]
His appointment triggered a 7% one‑day jump in Diageo’s share price, the biggest single‑day gain since 2020, as investors bet on a robust turnaround plan. [22]
Analysts and commentators expect Lewis to focus on:
- Streamlining Diageo’s 200‑plus brand portfolio, potentially disposing of underperforming labels. [23]
- Pushing the “Accelerate” cost‑saving programme, which now targets around $625m in savings and supports higher free cash flow. [24]
- Tightening capital allocation, including a more cautious approach to share buybacks while leverage remains elevated. TS2 Tech+2Barchart.com+2
Lewis inherits not just a bruised share price but an unsettled executive team and a sector facing structurally slower growth in alcohol consumption, especially among younger drinkers. [25]
Trading update and 2026 outlook: flat sales, modest profit growth
On 6 November 2025, Diageo issued its fiscal 26 Q1 trading statement and simultaneously cut guidance for the full year. [26]
Key points:
- Q1 reported net sales: down 2.2% to $4.9bn, reflecting disposals.
- Organic net sales:flat, with 2.9% volume growth offset by a 2.8% negative price/mix, mainly due to weaker Chinese white spirits. [27]
- Regional pattern:
- Europe, Latin America & Caribbean and Africa delivered solid organic net sales growth (c. +3.5%, +10.9% and +8.9% respectively). TS2 Tech+2insiderfinance.io+2
- North America organic net sales fell, with US spirits down about 4.1% as consumers traded down and tequila volumes weakened. [28]
- Asia–Pacific saw a 7.5% decline, dominated by a double‑digit drop in Chinese white spirits, cutting group net sales growth by roughly 2.5 percentage points. TS2 Tech+2www.diageo.com+2
On the back of this, management now expects for fiscal 2026:
- Organic net sales: “flat to slightly down” vs. FY25.
- Organic operating profit:low‑ to mid‑single‑digit growth, supported by cost savings rather than top‑line momentum. [29]
- Free cash flow: about $3bn in FY26, up from $2.7bn in FY25, with a goal to move within a 2.5–3.0× net‑debt‑to‑EBITDA range by FY28. [30]
Several outlets emphasised that shares dropped to decade‑lows after the update, with Diageo acknowledging that performance was “unsatisfactory” and that it needed to “go faster” on its turnaround. [31]
Tariffs, taxes and regulation: external pressures mount
Diageo’s operational issues are unfolding against a more hostile policy backdrop:
- In May 2025, the group warned that US tariffs on EU and UK spirits could hit operating profit by around $150m annually, and later raised that estimate to about $200m as tariff rates increased to 15%. [32]
- To soften the blow, Diageo launched and later expanded a cost‑saving programme (now “Accelerate”) targeting at least $500m–$625m in savings through 2028. [33]
Regulatory risk is also rising in growth markets:
- In India’s Maharashtra state, tax changes in 2025 sharply increased duties on certain premium local brands produced by multinationals like Diageo, while cutting rates for domestically owned firms. Industry groups say affected brands have seen volumes fall 35–40% in the state. TS2 Tech+1
- Diageo, along with peers, has challenged the rules in court, with a key hearing expected in December 2025. TS2 Tech+1
These issues underline how exposed Diageo is to both trade policy and local tax regimes in its biggest growth markets.
Balance sheet and cash flow: strong engine, heavy load
Despite the gloom around earnings growth, Diageo’s cash generation remains robust:
- Net cash from operations (FY25): about $4.3bn
- Free cash flow: around $2.7bn, slightly higher than the prior year. [34]
But that has to support:
- A dividend bill of roughly $1bn per year. TS2 Tech+1
- Capital expenditure still above $1bn, although FY26 guidance is for capex at the lower end of the $1.2–1.3bn range, down from $1.5bn in FY25. [35]
- Net debt of $21.9bn, equivalent to 3.4× adjusted EBITDA, which management aims to bring back inside 2.5–3.0× by FY28. TS2 Tech+2Barchart.com+2
Given that backdrop, most commentators expect deleveraging and portfolio tidying to take precedence over large‑scale share buybacks for the next couple of years. TS2 Tech+2FinanceCharts+2
Analyst ratings and price targets: upside on paper, but outlook clouded
Despite the downgrade cycle and profit warning, consensus numbers still point to upside from today’s depressed price – though with clear disagreement under the surface.
London‑listed DGE
Recent surveys of City analysts tracking Diageo’s London line show:
- A consensus rating around “Buy”, with most firms neutral‑to‑positive. TS2 Tech+1
- 12‑month price targets typically clustered in the 2,150–2,180p range, implying roughly 20–25% upside from today’s 1,731p level. [36]
- High estimates near 2,650–2,700p and lows around 1,600p, reflecting very different views on how sustainable the current downturn is. [37]
US ADRs (DEO)
On the New York‑listed ADRs:
- MarketBeat data for DEO points to an average 12‑month target of roughly $119, with most brokerages rating the stock Hold or Buy, implying almost 30% upside from about $92. [38]
- GuruFocus, collating six analysts, finds an average target closer to $108, with a range from $83 to $131 and an implied upside of about 17%, while its survey of eight brokerages yields an average recommendation of 2.4 on a 1‑to‑5 scale, consistent with an “Outperform” stance. [39]
At the same time, the tone of research is turning more cautious:
- UBS downgraded DEO from Buy to Neutral on 3 December 2025, without publishing a new price target, after previously championing the stock. [40]
- BofA Securities in late September cut its DEO target from $117 to $109 while keeping a Buy rating, citing slower growth but still attractive long‑term fundamentals. [41]
Overlaying that, some valuation models see considerably more upside – GuruFocus’s own “GF Value” suggests a fair value around $146 in a year’s time – but such outputs are highly sensitive to long‑term margin and growth assumptions. [42]
How big investors are reacting
Institutional investors are clearly split on Diageo at current levels:
- Bank of Montreal (BMO) trimmed its DEO position earlier in 2025, with filings showing a modest reduction in holdings. [43]
- Other value‑orientated managers, such as Keystone Financial, have added to positions, arguing that the combination of strong brands and a higher yield compensates for near‑term volatility. [44]
The overall shareholder base remains dominated by long‑only global equity funds and income managers, but recent downgrades and guidance cuts have clearly tested patience.
Bull vs bear case going into 2026
By early December 2025, the investment debate around Diageo can be boiled down to two competing stories.
The bull case: blue‑chip on sale
Supporters argue that:
- Diageo still owns one of the strongest drinks portfolios in the world, including Guinness, Johnnie Walker, Baileys, Tanqueray, Don Julio, Smirnoff and Crown Royal. [45]
- Brand power and geographic diversification across nearly 180 countries provide durable pricing power and long‑run growth options, especially in emerging markets such as Latin America, Africa and India. [46]
- The share price already reflects a lot of bad news: down around 25–30% over 12 months and well off its highs, with forward P/E multiples in the low‑teens and free cash flow yields north of 5%. TS2 Tech+2FinanceCharts+2
- The 4.5–5.5% dividend yield from an investment‑grade consumer defensive is rare, and Diageo has a long history of at least maintaining – and usually increasing – its payout through cycles. TS2 Tech+2Hargreaves Lansdown+2
- Under Dave Lewis, the “Accelerate” programme and potential portfolio rationalisation could lift margins and free cash flow even if top‑line growth remains subdued. [47]
On this view, Diageo looks like “quality at a discount”: a structurally sound business trading on a valuation more typical of slow‑growth staples, with a possible upside catalyst in a proven turnaround CEO.
The bear case: value trap in a changing industry
Sceptics counter that:
- Guidance has already been cut to “flat to slightly down” sales in FY26, with only modest operating profit growth – a long way from the 5–7% organic growth targets Diageo once promoted. [48]
- The company is heavily exposed to mature spirits categories in developed markets, where consumption per capita is flat or falling and younger consumers are experimenting with No‑ and Low‑alcohol alternatives. TS2 Tech+2FinanceCharts+2
- US and China, the two markets that powered pre‑2024 growth, are now underperforming badly, with no quick fix for weak consumer confidence and competitive tequilas. [49]
- Leverage remains high, limiting room for error if another downturn or regulatory shock hits, especially with US tariffs already adding up to $200m a year in headwinds. TS2 Tech+2Reuters+2
- The dividend payout ratio has crept up, and some analysts openly question whether the combination of a high yield, heavy investment needs and a leveraged balance sheet is sustainable if earnings do not recover. [50]
- Finally, there is execution risk: aggressive portfolio pruning and cost‑cutting can damage brand equity if done badly, while the industry’s structural challenges may limit what even a skilled operator like Lewis can achieve. [51]
In this framing, Diageo risks becoming a value trap – seemingly cheap because of high yield and low multiples, but with earnings and margins that continue to grind lower.
What today’s developments mean for investors
Putting it all together, 4 December 2025 marks a pivot point rather than a conclusion for Diageo shareholders:
- The FY25 final dividend has been safely delivered, locking in a historically high income stream for current holders. [52]
- The share price remains significantly below prior peaks, even after a modest rebound this week, and trades on much cheaper forward metrics than in the pre‑pandemic boom. [53]
- The official FY26 outlook is subdued, with little near‑term growth expected in sales and only modest profit expansion coming from cost savings. [54]
- Consensus price targets still point to double‑digit upside for both DGE and DEO over 12 months, but rating downgrades – including UBS’s move to Neutral – show that patience is wearing thin in parts of the analyst community. [55]
- Above all, the arrival of Dave Lewis on 1 January 2026 sets the stage for a multi‑year turnaround story in which portfolio simplification, deleveraging and brand investment will be closely scrutinised. [56]
Whether Diageo turns out to be a high‑yield bargain or a slow‑motion value trap will depend less on what happens today, and more on how quickly the new leadership can stabilise the US and China businesses, navigate tariffs and regulation, and prove that a world of “drinking less, but better” still leaves ample room for profit growth.
References
1. www.hl.co.uk, 2. www.marketscreener.com, 3. www.diageo.com, 4. www.hl.co.uk, 5. www.hl.co.uk, 6. www.marketscreener.com, 7. www.diageo.com, 8. www.diageo.com, 9. companiesmarketcap.com, 10. uk.finance.yahoo.com, 11. www.diageo.com, 12. www.ft.com, 13. www.investopedia.com, 14. www.beveragedaily.com, 15. www.thetimes.com, 16. www.diageo.com, 17. www.barchart.com, 18. www.hl.co.uk, 19. www.fool.co.uk, 20. www.diageo.com, 21. www.beveragedaily.com, 22. www.irishtimes.com, 23. www.ft.com, 24. www.diageo.com, 25. www.theguardian.com, 26. www.diageo.com, 27. www.diageo.com, 28. www.insiderfinance.io, 29. www.diageo.com, 30. www.diageo.com, 31. www.reuters.com, 32. www.investopedia.com, 33. www.esmmagazine.com, 34. www.barchart.com, 35. www.diageo.com, 36. www.investing.com, 37. www.investing.com, 38. www.marketbeat.com, 39. www.gurufocus.com, 40. www.gurufocus.com, 41. www.gurufocus.com, 42. www.gurufocus.com, 43. www.marketbeat.com, 44. www.fool.com, 45. en.wikipedia.org, 46. en.wikipedia.org, 47. www.diageo.com, 48. www.diageo.com, 49. www.just-drinks.com, 50. finance.yahoo.com, 51. www.ft.com, 52. www.diageo.com, 53. www.hl.co.uk, 54. www.diageo.com, 55. www.gurufocus.com, 56. www.diageo.com
