Diageo tops dividend table ahead of £1bn payday

A £1 billion round by Guinness drinks firm Diageo (LSE:DGE) will bring shareholders some much-needed cheer as part of October’s £3.5 billion in FTSE 100 dividend payments. 

The distribution is more than the combined value of awards by GSK (LSE:GSK) and Aviva (LSE:AV.) as the month’s next two biggest blue-chip payers. The 14-strong dividend diary for October also includes the high-yielding duo of Phoenix Group Holdings (LSE:PHNX) and wealth management firm M&G Ordinary Shares (LSE:MNG).

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The Diageo dividend of 62.98 US cents a share is due to be paid on 17 October, with the exact amount in sterling terms set to be revealed on 3 October.

The Tanqueray and Johnnie Walker company recently adopted a dollar dividend to reflect the greater proportion of net sales and expenses linked to the greenback.

For UK shareholders, however, dollar weakness means a smaller dividend in sterling terms despite the company increasing the headline award by 5% on a year earlier.

In October 2023, Diageo paid a dividend of 49.17p a share worth £1.1 billion that compares with the estimated 47.25p or £1.05 billion this time around.

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With the total dividend for 2023-24 up 5% to 103.48 US cents, the company has extended a record of growing the dividend every year since the 2000 financial year. The dividend was 1.7 times covered by earnings, compared with the company target range of 1.8-2.2 times.

The increased award comes in a year when Diageo’s record as a quality stock for the long term has been tarnished by a 24% decline in total shareholder return.

The sharply lower share price was driven by a materially weaker performance in Latin America and the Caribbean, resulting in a 9% decline in earnings per share for the year. The difficult year has reduced the total shareholder return for the past decade to 6%.

The Aviva interim dividend is due to be paid on the same day and will see shareholders get £316 million, or 11.9p a share, an increase of 7% on a year earlier as part of the insurer’s policy to grow the cash cost by a mid-single digit. 

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A strong performance in the second quarter means GSK is due to hand over £612 million, or 15p a share, part of its expectations for a full-year distribution amounting to 60p a share. 

The drugs group, whose policy is guided by a 40-60% payout ratio through the investment cycle, trades with a 3.8% dividend yield. That compares with 3.2% for Diageo and 6.8% at Aviva.

The stocks yielding the biggest dividend income in the month are M&G and Phoenix, both at 9.5%.

The wealth manager is due to distribute an interim dividend of 6.6p a share worth £157 million on 18 October, with the retirement savings and income business behind brands including Standard Life and SunLife paying 26.65p, or £267 million on 31 October. 

The shares of Land Securities Group (LSE:LAND) also have interest for income investors at 6.1%. The property landlord is paying its first quarterly dividend in relation to the March 2025 financial year on 4 October, with the award of 9.2p a share worth £69 million.

Source: interactive investor, SharePad. Data and dividend conversions to sterling from dollars at exchange rate on 25 September 2024.