Take a Shot and Invest in Diageo
James | Aug 11, 2010 | Comments 19

Smirnoff, Gordon’s, Tanqueray, Captain Morgan, Crown Royal, Seagram’s, Goldschlager, Jose Cuervo, Guiness, Red Stripe, Johnnie Walker…the list goes on and on. So what do all these alcohol brands have in common? They’re all owned by my favorite liquor company, Diageo (NYSE: DEO).
First off I want to state it’s not my emotional connection with Diageo’s top brands that make me want to be an investor of this company, and neither should this be a sole reason for you to invest. Why I like Diageo so much is that it’s a well-run business from top to bottom (market cap of $44 billion, revenues of $17 billion, profits $2.5 billion). I mean, what’s not to like? Diageo boasts eight of the world’s Top 20 liquors. They mix-up a range of top of the class liquors, Johnnie Walker, to your college boy’s choice, Captain Morgan.
The company has continued to grow over the past year especially in emerging markets, whose sales are up +15%. This is a Diageo owns an outstanding 40% return on equity, which is usually a good indicator on profitability per dollar spent.
Diageo has had steady revenue streams throughout the past year, raking in $15 billion with a profit of $2.34 billion. I expect earnings to continue to grow as consumer spending increases and more consumers purchase those more expensive labels. Another plus is the potential for Diageo to pay out a 3% yield.
Overall, I believe Diageo will continue to grow due to it’s portfolio of top liquor brands, strong cash flow, and an attractive dividend, all making it an attractive investment. Take a shot on Diageo.
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Filed Under: Featured • Technology | Retail
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