There was a significant hole in my portfolio which has been waiting to be filled up. Some are expecting a major market correction and the economy is in shaky grounds in many markets. To me it sounds like perfect time to start a position in alcohol sector. Gotta love the vice stocks – there aren’t many better businesses than legalised drugs. So I went ahead and started a position in Diageo (NYSE:DEO) with a purchase of 20 shares for 113,76 USD per share.
Alcohol is a sector which is heavily consolidated for few major players. Diageo is one of the big dogs controlling brands such as Guinness, Smirnoff, Bayley’s, Johnnie Walker and bunch of local brands. They are a global company operating in every geographical region. Together with major trends such as increasing population and middle class, it should provide a natural growth drivers for the years to come. Currently they are paying a dividend in the neighbourhood of 3,45 USD (being a UK based company they report in GBP so the USD dividend depends on the exchange at the time of the payment) which translates to a yield of 3%. That’s quite normal and appears to be sustainable as the payout ratio is below 55%.
At the time purchase the share price was down because of this: http://finance.yahoo.com/news/gpm-announces-investigation-diageo-plc-173200402.html. In long term I view such hiccups, whether or not they are true, as random noise.
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