High on the list of favorite strategies at the Financial Velociraptor is to purchase companies that are relentless dividend raisers. Our first recommendation from this category is Diageo (NYSE: DEO).
You see raptors, nothing signals more clearly to investors that management is looking after their interest firsts than a long history of increasing payouts to shareholders. This can be in the form of paying down long term debt, buying back shares, or dividends; and we like dividends best. Diageo is a real winner in this category with 15 consecutive years of dividend increases. Importantly, the business continued with sufficient growth to fund this through down periods such as the 2008 global recession.
ACTION TO TAKE: Buy DEO up to USD120.00.
We’ll use today’s closing price of 111.85 as the reference point for tracking Velociraptor portfolio returns. Our yield at this price is about 3.9%. Diageo’s P/E ratio of about 21 is a significant discount to its peer’s P/E of about 27. Since DEO holds the valuable brands in its space, I think we can expect it to catch up to the industry multiple. That gives us about 28% upside before factoring in any growth.
Devour your prey, raptors!