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DIAGEO PLC ADRs $80 (New York symbol DEO; Conservative Growth Portfolio, Consumer sector; ADRs outstanding: 624.5 million; Market cap: $50.0 billion; Price-to-sales ratio: 3.3; Dividend yield: 3.1%; TSINetwork Rating: Above Average; www.diageo.com) is the world’s largest premium alcoholic beverage company. Like Yum Brands, U.K.-based Diageo is another Consumer stock that gives investors a less-risky way to profit from overseas markets.
In the fiscal year ended June 30, 2011, Diageo’s sales rose 1.6%, to 9.9 billion pounds from 9.8 billion pounds (1 British pound = $1.63 Canadian). Sales in markets such as Latin America and Africa rose 13%, while sales in Asia Pacific grew 9%. These gains offset slower sales in North America (up 3%) and Europe (down 3%).
Diageo earned 2.1 million pounds, or 3.34 pounds per ADR (each American Depositary Receipt represents four Diageo common shares). That’s up 16.3% from 1.8 billion pounds, or 2.88 pounds per ADR, in fiscal 2010.
These figures exclude costs related to a new restructuring plan, which includes closing distilleries and warehouses in Europe. The plan should cut Diageo’s annual expenses by 80 million pounds by the end of fiscal 2013.
The stock trades at a reasonable 13.3 times the $6.00 U.S. per ADR that it will probably earn in fiscal 2012. The $2.49 U.S. dividend yields 3.1%.
Diageo is a buy.
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