Diageo (OTCMKTS:DGEAF – Get Free Report) and MGP Ingredients (NASDAQ:MGPI – Get Free Report) are both consumer defensive companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, risk, analyst recommendations, profitability, institutional ownership, valuation and earnings.
Profitability
This table compares Diageo and MGP Ingredients’ net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Diageo | N/A | N/A | N/A |
| MGP Ingredients | 13.55% | 14.39% | 9.02% |
Institutional & Insider Ownership
33.3% of Diageo shares are owned by institutional investors. Comparatively, 77.1% of MGP Ingredients shares are owned by institutional investors. 28.7% of MGP Ingredients shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.
Analyst Ratings
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Diageo | 0 | 0 | 0 | 0 | N/A |
| MGP Ingredients | 0 | 0 | 3 | 0 | 3.00 |
MGP Ingredients has a consensus target price of $130.75, indicating a potential upside of 29.88%. Given MGP Ingredients’ higher possible upside, analysts clearly believe MGP Ingredients is more favorable than Diageo.
Valuation and Earnings
This table compares Diageo and MGP Ingredients’ gross revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Diageo | N/A | N/A | N/A | $0.78 | 50.29 |
| MGP Ingredients | $782.36 million | 2.82 | $109.46 million | $4.90 | 20.54 |
MGP Ingredients has higher revenue and earnings than Diageo. MGP Ingredients is trading at a lower price-to-earnings ratio than Diageo, indicating that it is currently the more affordable of the two stocks.
Dividends
Diageo pays an annual dividend of $0.52 per share and has a dividend yield of 1.3%. MGP Ingredients pays an annual dividend of $0.48 per share and has a dividend yield of 0.5%. Diageo pays out 66.3% of its earnings in the form of a dividend. MGP Ingredients pays out 9.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.
Summary
MGP Ingredients beats Diageo on 10 of the 12 factors compared between the two stocks.
About Diageo
Diageo plc, together with its subsidiaries, engages in the production, marketing, and sale of alcoholic beverages. It offers scotch, gin, vodka, rum, raki, liqueur, wine, tequila, Chinese white spirits, cachaça, and brandy, as well as beer, including cider and flavoured malt beverages. The company also provides Canadian, Irish, American, and Indian-Made Foreign Liquor whiskies, as well as ready to drink and non-alcoholic products. It provides its products primarily under the Johnnie Walker, Guinness, Tanqueray, Baileys, Smirnoff, Captain Morgan, Crown Royal, Don Julio, Cîroc, Buchanan's, Casamigos, J&B, and Ketel One brands. The company operates in the United States, the United Kingdom, Turkey, Australia, Korea, India, Greater China, Brazil, Mexico, South Africa, Nigeria, and internationally. Diageo plc was incorporated in 1886 and is headquartered in London, the United Kingdom.
About MGP Ingredients
MGP Ingredients, Inc., together with its subsidiaries, produces and supplies distilled spirits, branded spirits, and food ingredients in the United States and internationally. It operates through three segments: Distillery Solutions; Branded Spirits; and Ingredient Solutions. The Distillery Solutions segment provides food grade alcohol for beverage applications that include bourbon and rye, whiskeys, as well as grain neutral spirits, include vodka and gin; and food-grade industrial alcohol, which is used as an ingredient in foods, personal care products, cleaning solutions, pharmaceuticals, and various other products. This segment also provides fuel-grade alcohol for blending with gasoline; distillers feed and related co-products, such as distillers feed and corn oil; and warehouse services, include barrel put away, storage, and retrieval, as well as blending services. The Branded Spirits segment provides ultra-premium, super premium, premium, mid, and value branded distilled spirits. The Ingredient Solutions segment provides specialty wheat starches for food applications under the Fibersym, Resistant Starch series, and FiberRite RW Resistant Starch names; specialty wheat proteins for food applications under the Arise and Proterra names; gluten-free textured pea proteins; commodity wheat starch for food and non-food applications; and commodity wheat proteins. The company sells its products directly or through distributors to manufacturers and processors of finished packaged goods or to bakeries. MGP Ingredients, Inc. was founded in 1941 and is headquartered in Atchison, Kansas.
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