The Motley Fool

Should I buy Diageo shares for the long term to get rich?

Image source: Getty Images.

When I am looking for investments to hold for the long term, I try to concentrate on companies with a definite competitive advantage. Diageo (LSE: DGE) shares are a great example of what I’m looking for in a business. 

This competitive advantage can be anything. A strong, globally recognised brand or portfolio of brands, large economies of scale that come with size, or a highly respected management team that has a strong track record of creating value for investors. 

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Diageo shares: the competitive advantage 

Diageo owns a portfolio of some of the world’s most recognised alcoholic beverage brands. Brands such as Guinness, Smirnoff vodka and Johnnie Walker whisky.

Johnnie Walker is the world’s best-selling Scotch whisky. The value of the brand alone is estimated at $4.5bn. Guinness’s brand value has been pegged at just under $4bn. Those figures suggest these are some of the most valuable brands in the world, and it would cost billions upon billions of dollars of investment for a competitor to steal this market share. 

These figures give me confidence in the strength of the company’s competitive advantage. And they also suggest to me that Diageo shares could be an excellent long-term investment for my portfolio.

Indeed, while it is impossible to predict what the future holds for the global economy, I can say with some degree of certainty, that in 10 years, consumers will still be drinking Guinness and Smirnoff

Long-term growth 

Diageo’s management isn’t just leaning on these products to support the firm’s long-term growth. The group is also on the lookout for new acquisitions. It has acquired a handful of smaller drinks companies recently, improving its customer offering. 

I think this initiative should help Diageo shares stay ahead of the competition for the foreseeable future. New deals will also help the group’s bottom line. I think that reinvesting cash from operations into a steady stream of new acquisitions is a great use of shareholder funds. 

The firm is also returning cash to investors. It has repurchased stock in the past to boost earnings per share. Diageo shares also offer a dividend yield of 2.4% at the time of writing. I think that looks quite attractive in the current interest rate environment. 

The bottom line

Considering all of the above, I am considering buying Diageo shares for my portfolio. I reckon owning the stock as part of a well-diversified portfolio could help me get rich in the long run.

Over the past decade, the stock has yielded an annual return for investors of over 11%. At this rate of return, I calculate it would take 6.5 years to double my initial investment. There are only a handful of other companies that could produce the same kind of return, in my opinion. That’s why Diageo shares stand out to me as a long-term buy. 

There’s a ‘double agent’ hiding in the FTSE… we recommend you buy it!

Don’t miss our special stock presentation.

It contains details of a UK-listed company our Motley Fool UK analysts are extremely enthusiastic about.

They think it’s offering an incredible opportunity to grow your wealth over the long term – at its current price – regardless of what happens in the wider market.

That’s why they’re referring to it as the FTSE’s ‘double agent’.

Because they believe it’s working both with the market… And against it.

To find out why we think you should add it to your portfolio today…

Click here to get access to our presentation, and learn how to get the name of this 'double agent'!

Rupert Hargreaves owns shares in Diageo. The Motley Fool UK has recommended Diageo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.