Down 55%, is now the time to buy Diageo shares for my ISA?
Now sitting at a 10-year low, Diageo shares seem exceptionally undervalued and offer a solid dividend yield. Since early 2022, Diageo (LSE:DGE) shares have lost over half their value. This decline is especially striking given that the FTSE 100 index has risen about 30% during the same period. Essentially, investors could have earned significantly better returns by choosing other FTSE 100 stocks.
From personal experience, I held Diageo shares in my Stocks and Shares ISA until earlier this year. After selling, Diageo’s share price still dropped another 27%, making the stock even cheaper and the dividend yield more attractive. This raises the question: should I add Diageo back into my portfolio?
World-class brand portfolio
Diageo owns several iconic brands, including:
- Johnnie Walker
- Tanqueray
- Gordon’s
- Smirnoff
- Don Julio
- Baileys
- Guinness
This list is not exhaustive but highlights why it’s surprising the stock has fallen 55% in under four years.
Market uncertainty
The main challenge lies in understanding why alcohol sales have stalled industry-wide. There is no consensus on the causes behind the current slump.
"Nobody seems to be sure why exactly sales across the alcohol industry are in the doldrums."
Determining whether this creates a lucrative opportunity to buy Diageo shares depends largely on how these challenges are resolved.
Author’s summary
Diageo’s steep share price decline contrasts with its strong brand portfolio and attractive dividend, but uncertainty in the alcohol sector clouds the investment outlook.