Diageo shareholders have good reason to celebrate

It is safe to assume that Diageo is aiming for a 9% dividend, or more, for the financial year – that’s a strong statement of corporate confidence

Diageo rarely misses an opportunity to boast about the squillions it has returned to shareholders since its creation, via the merger of Guinness and Grand Metropolitan in 1997, but here’s a small fact it strangely neglected to mention on Thursday: the dividend, pushed up 9% yesterday, is rising at the fastest rate since the off.

It was only an interim dividend but since Diageo is religious in observing a one-third/two-third split in distributions to shareholders it is safe to assume it is also aiming for 9%, or more, for the whole 2012/13 financial year. That’s a strong statement of corporate confidence.

Southern Europe, where sales fell 19% in the half, is the only bleak spot. “I don’t see it getting any easier there in the next 24 months,” says chief executive Paul Walsh. But since he’s talking about a territory contributing only 5% of Diageo’s business, the pain in Spain and Greece gets lost in the multinational wash. The health of the US – a “very resilient market,” says Walsh – and emerging markets lie behind Diageo’s current swagger.

Pre-tax profits rose 5% to £1.96bn in the six months. On a global basis, the group seems to have had little difficulty in performing its usual trick of pushing up prices while simultaneously encouraging Scotch drinkers to try a pricier label. This price/mix effect turned a pedestrian 1% increase in volumes into a 5% rise in sales. Put another way, Diageo seems to run on rails.

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