Diageo dividend: cash coverage and yield
Diageo pays a 50.00-US-cent annual dividend floor, down from 103.48 cents for fiscal 2025. Diageo generated $3,069 million of free cash flow in fiscal 2026 and had $1,059 million left after those payments.
How much does Diageo pay shareholders over time?
The cash schedule shows the competing demands. Acquisitions used $23 million while business and asset sales brought in $304 million. Debt repayments were $3,147 million against $1,498 million issued. Cash still fell $374 million, and net debt ended at $19,991 million, above $16,620 million in fiscal 2022. The dividend reset formalised the change: Diageo adopted a 30.0%–50.0% earnings payout range with a 50.00-US-cent annual floor, down from 103.48 cents for fiscal 2025.
The base dividend holds at $0.50 in 2027 and rises to $0.52 in 2028. It reaches $0.55 in 2029. The bear holds $0.50 throughout, relying on the stated floor after the recent cut from $1.0348. The bull also starts at $0.50, then reaches $0.56 and $0.62 as cash flow improves. The $2,000m FY27 free-cash-flow target supports the floor, but debt reduction and exceptional costs limit faster increases.
| Jun 2026 | Jun 2025 | Jun 2024 | Jun 2023 | Jun 2022 | |
|---|---|---|---|---|---|
| Dividend per share | 50.00 | 103.48 | 103.48 | 98.55 | 91.09 |
What this means. The 2026 operating profit is much lower partly because it includes 2,527 million dollars of unusual charges for write-downs, faster depreciation, and restructuring.
Is Diageo's dividend covered by its cash?
The position improved after buybacks stopped. In fiscal 2025, only $135 million remained after payments to both sets of shareholders. In fiscal 2026, free cash flow of $3,069 million left $1,059 million after those payments. Net capital expenditure was $1,181 million, down from $1,549 million, and included a $20 million investment in smaller-bottle capacity. Free cash flow already includes capital expenditure, so it should not be deducted again.
| Jun 2026 | Jun 2025 | Jun 2024 | Jun 2023 | Jun 2022 | |
|---|---|---|---|---|---|
| Free cash flow | 3,069 | 2,571 | 2,491 | ||
| − Dividends paid | 1,846 | 2,298 | 2,242 | 2,065 | 2,300 |
| − Share buybacks | 0 | 0 | 987 | 1,673 | 2,985 |
| = Free cash flow not paid out | 1,059 | 135 | |||
| Paid out, % of free cash flow | 60.1% | 89.4% | 129.6% |
What this means. The company's own net debt is higher because it includes lease payments and borrowing-related contracts that our count leaves out.
What could change Diageo's dividend?
Management expects broadly flat organic net sales for the year to June 2027, low-to-mid-single-digit organic operating profit growth and a mid-single-digit North American sales decline. It targets $2,000 million of free cash flow and 2.75x leverage. Exceptional cash costs are expected to reach $850 million. Through fiscal 2029, management targets $8,000 million of cumulative free cash flow after exceptional cash costs.
The base case would strengthen if FY27 delivers broadly flat organic sales and low-to-mid-single-digit operating-profit growth, followed by stabilising North American demand. Free cash flow that funds the dividend while reducing leverage through FY29 would support the assumed multiple.
| October 2027 | October 2028 | October 2029 | |
|---|---|---|---|
| Dividends per share | 0.50 (0.50 / 0.50) | 0.52 (0.50 / 0.56) | 0.55 (0.50 / 0.62) |