Why Diageo Stock Cratered This Week
Key Points
Diageo cited weakness among U.S. consumers for underwhelming results.
Management cut the dividend and lowered guidance.
The first half dividend was cut by more than half, year over year.
- 10 stocks we like better than Diageo Plc ›
Diageo (NYSE: DEO) released its semi-annual financial update this week, and the results had investors bailing on the stock. Shares of the global alcoholic beverages company sank 10.8% this week, according to data provided by S&P Global Market Intelligence.
The results weren't what the company had previously expected, either. Now, management has lowered its guidance and cut the dividend. That sums up why investors decided to sell shares this week.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Investors weren't toasting Diageo's latest update. Image source: Getty Images.
Dividend cut
The owner of the Guinness, Smirnoff, and Johnnie Walker brands had previously said it expected organic sales to be about flat in 2026 versus 2025. For the first half of the fiscal 2026, though, organic sales sank 2.8%. That led the company to cut its year-end guidance.
Maybe more importantly for income investors, Diageo also cut its dividend. The company declared $0.20 per share, even though it had paid $0.405 per share in the first half of fiscal 2025. Dividends are typically viewed as a commitment from the company to investors seeking income. A dividend cut can be considered a breach of trust on top of the income decline.
After a sharp 32% decline last year, Diageo's stock was recovering this year. Word of weakness in the U.S. market wiped out most of that recover this week, however. The company has now slashed its dividend to aid in a turnaround plan.
It will provide more financial flexibility and help support the balance sheet, but that isn't what some investors wanted to hear. It's not surprising that a lower income stream and a weakened business environment led investors to move on from Diageo stock this week.
Should you buy stock in Diageo Plc right now?
Before you buy stock in Diageo Plc, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Diageo Plc wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $519,015!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,086,211!*
Now, it’s worth noting Stock Advisor’s total average return is 941% — a market-crushing outperformance compared to 194% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of February 28, 2026.
Howard Smith has no position in any of the stocks mentioned. The Motley Fool recommends Diageo Plc. The Motley Fool has a disclosure policy.
Recommended Articles
