Why I’d sell Bitcoin and buy this FTSE 100 dividend stock instead

Road sign warning of a risk ahead
Road sign warning of a risk ahead

Is there a riskier bet in town than Bitcoin? When I last wrote about the cryptocurrency, it had just crashed below the critical $6,000 marker and was desperately hanging on just above $5,000. With this psychological barrier been breached in the fortnight since that article, it’s now anyone’s guess as to how low Bitcoin could go.

Before the November washout began, crypto expert Arthur Hayes — chief executive of Bitcoin trading platform BitMEX — predicted that the digital currency could fall as low as $2,000, advising that “$2,000 to $3,000 is my new sweet spot.”

It’s worth noting that the cryptocurrency was trading much higher at $6,400 when Hayes made his comments, versus $4,400 as I type. If selling activity continues at this rate, then Hayes’s prediction will come to fruition long before the end of the year.

Take stock(s)

Bitcoin has proved nothing short of a train wreck in 2018, leading many to predict that the bitcoin bubble has finally burst. We could well be looking at another year of painful drops in 2019.

I’m not sure why anyone would take a gamble with such a high-risk asset when there’s plenty of exceptional FTSE 100 stocks out there that can generate stunning returns.

Look, I’m not going to pretend that the investment outlook for share markets isn’t without risk. Fears over escalating trade wars between the US and China, rising interest rates in the States, an escalation of Russian foreign policy aggression, and a chaotic British withdrawal from the European Union, all threaten to depress broader market sentiment next year.

A proven winner

I’m certain that dependable dividend grower Diageo(LSE: DGE) will prove its mettle in these difficult conditions, though. So much so, it’s a share I’ve bought I recent weeks.

And thanks to its resilience whatever the broader global economy does, not to mention enjoyment of well-loved labels such as Johnnie Walker whisky and Captain Morgan rum, it can bank on revenues continuing to rise, irrespective of whether pressure on broader consumer spending power grows.

On a related, and encouraging, note the Footsie firm announced this month that it was hiving off a gaggle of underperforming brands like Seagram’s to Sazerac for $500m. It’s a move that will sharpen a focus on its established brands and gives it more flexibility to acquire other industry-leading labels, like it did with Casamigos back in 2017.

Diageo’s evergreen labels are expected to deliver a 5% earnings rise in the year to June 2019, a figure that allows City analysts to also tip a chunky rise in the annual dividend. A 68.9p per share reward is forecast, suggesting a sizeable upgrade from the 65.3p dividend of last year, and which results in a 2.5% yield.

The yield might not be the biggest, but it still springs past the inflation rate right now. What’s more, the brilliant profits visibility created by its stunning product stable and its broad geographic base, as well as its rock-solid balance sheet, means that Diageo’s a great bet for people like me that seek increased dividends year after year. I’d be very happy to sell out of Bitcoin today and use the cash to buy the blue-chip drinks hero.

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Royston Wild owns shares of Diageo. The Motley Fool UK has recommended Diageo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.