As we await the launch of Motley Fool Global Gains , our new international investing service, we are taking a look back at some of our best international stock ideas. This article was originally published on Feb. 17, 2006.

Here's the investing word for today, boys and girls. It stems from the Latin word dies, meaning "day," and the Greek word geo, meaning "from Earth."

Diageo. Here's how you pronounce it: Dee-AHH-jee-o.

Hmm. You're not convinced this has anything to do with investing. Fair enough. How about these, then?

  • More top-20 liquor brands than the next five competitors combined
  • $14 billion in worldwide revenues
  • $3 billion in operating cash flow per year
  • 4% dividend yield

Ah, so those got your attention, did they? Good, because they basically describe Diageo, a London-based seller of liquor, beer, and wine, and a compelling international investment.

In fact, when surveying the landscape of large-cap international companies, Motley Fool Income Investor pick Diageo (NYSE:DEO) is probably the very first one investors should consider. I really like the economics of the spirits business, and I think Diageo is well-positioned to continue its top-shelf performance.

The business and the brands
Diageo is the world's largest spirits seller. Brands like Smirnoff, Johnnie Walker, Baileys, Captain Morgan, J&B Whiskey, Jose Cuervo, and Tanqueray line the company's liquor cabinet, contributing more than half of the company's unit volumes. Diageo also has a few beer and wine brands, of which the most popular is Guinness. The London-based company sells its alcoholic beverages all over the world, but North America and Europe make up almost 75% of Diageo's volumes.

Put it this way: If you're traveling anywhere in the world and you can find a pub, chances are that you can relax with a Guinness or a Tanqueray martini. And while the likes of Motley FoolInside Value pick Anheuser-Busch (NYSE:BUD), InBev, and SABMiller sell far more beer around the world, no one can touch Diageo when it comes to pitching us gin, vodka, and scotch -- not even the newly combinedAllied Domecq-Pernod Ricard combo.

But Diageo's strength also comes from the managers who sit in the boardroom.

The British are coming!
In August of last year, the company liquidated its remaining 7% stake in General Mills (NYSE:GIS) and refinanced some debt related to the divesting of Burger King in 2002. The company is now finally removed from the cereal and burger businesses.

Why is this important? In a word: focus. Diageo management is now fully dedicated to building and strengthening its adult beverage brands. When companies stick to what they know, good things can happen.

We also have to credit management for using Diageo's cash flow to buy back loads of stock. Over the last 12 months, Diageo repurchased around $2.7 billion worth of shares, reducing its average share count by 4%.

Operationally, Diageo seems to be moving along very nicely, although Europe continues to be challenging. In fiscal 2006, strong performance in North America and other international markets was offset slightly by flat sales in Europe. Earnings per share still rose more than 48%, and management indicated it will continue to repurchase shares.

A Foolish chaser
So Diageo has the brands, the management, and the focus. But how does the stock look?

The ADRs increased around 23% in the last year. While they're not as cheap as they were in 2005, when Berkshire Hathaway's (NYSE:BRKa) (NYSE:BRKb) insurance subsidiaries picked up 15 million shares, I still think the shares have some room to grow.

The stock sells at a P/E of around 19 times earnings, and the company delivers returns on capital in the mid-teens (up from 10% a few years ago). Both metrics are comparable to peers like Anheuser-Busch, Brown-Forman (NYSE:BFB), and Constellation Brands (NYSE:STZ).

But these companies just can't compare to the liquor brands that Diageo brings to its wholesalers. In fact, Morningstar reports that 80% of Diageo's U.S. distributors exclusively sell Diageo brands. Now that's brand power -- and a huge competitive advantage that will serve the company well over the next five years.

With its 4% yield, growing operating earnings, and a willingness to buy back shares, Diageo has demonstrated that it can deliver for shareholders. If you're looking to wet your beak with an international stock, Diageo could be your cup of Tanqueray.

If you are interested in international investing, try this free report from our Global Gains team: One International Stock to Buy Today .

Diageo is an Income Investor pick, and Anheuser-Busch is an Inside Value pick. Try out the newsletter that best fits your investing style with a 30-day free spin.

Fool sector head Joey Khattab updated this article, which was written by Andy Cross. Joey drinks the occasional Guinness, but he does not own any shares of the companies mentioned. The Fool has a disclosure policy .