Is Diageo a good dividend stock to buy?

Diageo’s share price LON:DGE was largely unchanged after its half year update which showed inflation and uncertainty are still an issue.

Diageo, the global spirits giant, has posted mixed results for the first half of the financial year 2025.
The company saw organic sales grow by +1.0%, despite inflationary pressures, and a level of economic uncertainty that’s affecting consumer spending and behaviour.

Diageo has largely been able to maintain its market position, with share gains, or market share stability in 65.0% of its markets. Performance in North America actually improved, driven by demand for the firm’s premium brands, such as Don Julio and Crown Royal.

Guinness, the firm’s iconic stout brand, achieved double-digit sales growth for the eight consecutive half year. However, I wonder how much reputational damage the brand has suffered, following the supposed shortages of the stout, during the Christmas period.

The decline in profitability at Diageo, reflects ongoing pricing pressures in the sector, with operating profit down by- 4.90%, and operating margins falling by -1.32%. Whilst EPS (before exceptionals) fell -9.60% to 97.7 cents.

This downturn has been caused by a variety of factors, including unfavourable foreign exchange movements (a stronger US dollar), though this has been partially offset by reductions in marketing spend, and some margin expansion.

Diageo, like many other multinationals, faces fresh obstacles with the implementation of US tariffs, which has led the company to withdraw medium-term guidance.

CEO Debra Crew acknowledged that while this clouds the businesses outlook, Diageo is in the process of introducing strategies to reduce the impact of tariffs, whilst at the same time its talking to the new US administration about the broader industry impacts.

Despite this, Diageo’s financial position remains solid, its free cash flow has increased to $1.70 billion, and it’s worth noting that the company has maintained its interim dividend.

While the pace of recovery in some markets has been slower than expected, Diageo’s management is confident about the long-term fundamentals of the spirits sector. And, in Diageo’s ability to capture and maintain market share, in the alcoholic beverage segment.

Diageo’s share price, though largely unchanged today, has fallen by -5.50% over the last month, and by almost -21.0% over the last year.

The fact that rivals like Pernod Ricard and Remy Martin, have experienced even larger price declines offers scant comfort to shareholders, though it does suggest Diageo is among the best in a bad bunch.