Why We're Buying Diageo

The below video is part of The Motley Fool's "11 O'Clock Stock" series where we recommend a new stock every weekday at 11 a.m. ET on Fool.com over the next 50 weekdays. To see a video of co-founder Tom Gardner explaining the series, click here. To see our original recommendation of Diageo, click here.

In the above video, Income Investor Advisor James Early explains why he thinks Diageo (NYSE: DEO  ) should provide investors with winning returns.

While James doesn't drink personally, that doesn't stop him from appreciating Diageo's strong brands and international sales potential. Despite a poor sales environment, Diageo has managed to grow operating income in emerging markets by 16%!

However, the best part of Diageo's sales growth is its stellar ability to generate cold, hard cash. The company converts 17% of sales into free cash flow. For perspective, Anheuser-Busch (NYSE: BUD  ) converts sales to free cash flow at 11%, Constellation Brands (NYSE: STZ  ) at 6%, and Brown-Forman (NYSE: BF-B  ) at 16%. Diageo is at the top of its league.

If you're looking for a great dividend yield and strong brands that are growing, James says it's time to drink up some shares of Diageo.

Keep checking back to Fool.com at 11 a.m. ET for a new pick every day!