People drink for many reasons, whether it be to celebrate good news or just to relax with friends. Whatever the reason, the array of brands that are offered by Diageo are used to celebrate every day and everywhere.

Diageo, which trades on both the New York and London Stock Exchange, is a UK-based global beverages giant, marketing premium liquor brands such as Johnnie Walker, Baileys, Guinness, Smirnoff and not least of which the famous Jamaican lager, Red Stripe. The brands carried by this company include seventeen of the top 100 premium distilled spirits. The Company’s beer and wine brands account for twenty one percent and six per cent respectively of their net sales. Several of their brands are the number one in the world, with brands like Johnnie Walker, Guinness and Baileys just to name a few.

The company reported a five per cent growth in net sales for the nine months ending March 2013, including a four per cent gain in net sales in the first three months of 2013. Emerging markets saw especially robust activity, with Latin American and Caribbean sales up 14 per cent and Turkey sales higher by nine per cent. Diageo has effective control (27.4 per cent holdings) of United Spirits in India. The company has seen solid growth in Africa and market share gains in the Asia-Pacific countries during December to March have tempered fears that it was running out of steam in developing markets.

The International Monetary Fund’s (IMF) growth projections expect developing nations and emerging markets to expand 5.3 per cent and 5.7 per cent in 2013 and 2014 respectively. The IMF expects the US economy will rise between 1.1 per cent to 1.9 per cent between 2013 and 2014.

Emerging market sales will be boosted further by the company’s proposed expansion into the Indian market. Diageo is in the process of restructuring and is aiming to increase productivity and reduce costs, which should bode well for its bottom line. Analysts forecast an EPS Compound Annual Growth Rate for Diageo PLC of nine per cent, on average, for the next five years. Analysts also expect the spirits company to hike its dividend payout by about eight per cent this year. Diageo’s year-to-date (YTD) returns have been six per cent with a dividend yield of 2.29 per cent. Over the last five years the return has been 52.59 per cent. The stock has a 52-week high of US$127.51 and is currently trading in the region of US$122.00 to US$123.00.

This company has good succession planning. Ivan Menezes will be the new Chief Executive Officer with effect from July 1 2013 when Paul Walsh who is retiring on June 30, 2014 is due to step down from the Board at the end of September 2013. During the transition process (approximately one year), Paul Walsh will share his knowledge and experience of the business with incoming Ivan Menezes. During Mr Walsh’s 13-year tenure, Diageo has grown into a strong company and brand, and the incumbent is expected to inspire the organization and continue to achieve the company’s objectives.

You may ask, is Diageo a buy? This company has steady and inelastic demand, strong margins and a brand presence that is difficult to duplicate. Diageo has stood its ground with a 25 per cent gain in its stock price in the past year while its competition stumbled.

Ever heard the saying “drink responsibly”? Diageo has developed a web page designed to check your DrinkIQ. They contribute to the military and their families by providing iPads so families can keep in touch. They also make sure that the military men and women are given food and other supplies on a regular basis. This is just one of the many ways they contribute as a good global citizen.

In conclusion, the international consumer staples sector offers opportunities for dividend investors. While the sector’s defensive nature is good for portfolio diversification, its exposure to emerging market growth promises total return potential, including sustained dividend growth in the future. Investors should still be selective in the sector, given that valuations have risen, pricing in the expectations of higher future growth.

Deborah Vieira is a Wealth Advisor at Stocks and Securities Limited and can be contacted via dvieira@sslinvest.com.