Diageo Cuts Dividend as US and China Weakness Hits Sales

The Tip Desk · February 25, 2026 · 2 min read

The beverage alcohol leader reduced its interim dividend to 20 cents per share from 40.50 cents in the prior-year period.

Diageo Plc (DGE), the global beverage alcohol maker, has reduced its dividend to strengthen its balance sheet and increase financial flexibility,. The company declared an interim dividend of 20 cents per share, down from 40.50 cents per share in the first half of fiscal 25. The board is now targeting a payout policy of 30-50% and has established a minimum dividend floor of 50 cents per annum,.

Reported net sales for the six months ended 31 December 2025 declined 4.0% to $10.5 billion,. Organic net sales fell 2.8%, with organic volume down 0.9% and negative price/mix of 1.9%. The company said strong organic net sales growth in Africa, Europe, and Latin America and Caribbean were offset by weakness in North America and the adverse impact of Chinese white spirits in Asia Pacific,.

Chief Executive Officer Sir Dave Lewis stated that US spirits performance reflected competitive pressure from affordable alternatives and pressure on disposable income. Excluding Chinese white spirits, organic net sales for the group would have been approximately 2% higher.

Reported operating profit declined 1.2% to $3.1 billion,. Organic operating profit fell 2.8%, which the company attributed to tariff costs and adverse market mix, though these were partially offset by efficiencies in marketing investment. Earnings per share before exceptional items declined 2.5% to 95.3 cents,.

Cash flow also trended lower, with free cash flow decreasing by $164 million to $1.5 billion. Net debt stood at $21.7 billion as of 31 December 2025. To improve leverage, Diageo announced an agreement in December 2025 to sell its shareholding in the Kenyan spirits business and East African Breweries plc to Asahi Group Holdings, Ltd. The company expects net proceeds after tax and transaction costs of $2.3 billion, which is expected to reduce net debt to adjusted EBITDA by approximately 0.25x.

Diageo updated its fiscal 26 guidance due to continued weakness in the US and the impact of Chinese white spirits,. The company now expects organic net sales to be down 2-3% and organic operating profit growth to be flat to up low-single-digit. This profit outlook includes savings from the Accelerate programme, with approximately 50% of those savings now expected in fiscal 26.

Free cash flow guidance for fiscal 26 remains at $3 billion,. The company expects capital expenditure at the lower end of the $1.2-1.3 billion range.