This food company just announced its new Accelerate growth strategy, which will focus on five categories that, together, account for 45% of its revenues: cereal, pet food, ice cream, snack bars and Mexican food. The shares have a current annual yield of 3.57%, paid quarterly.
General Mills Inc. (GIS)
From Directinvesting.com
Founded in 1856 and headquartered in Golden Valley, Minnesota, General Mills is a leading global manufacturer and marketer of branded consumer foods, such as ready-to-eat breakfast cereals, refrigerated dough and other baking items, snack foods, ice cream, and yogurt. Its portfolio of well-known brands includes Cheerios, Betty Crocker, Pillsbury, Haagen-Dazs, and Yoplait. Sales outside the U.S. account for just less than one fourth of total sales. General Mills is considered a defensive stock because it provides constant dividend and stable earnings, regardless of the state of the overall stock market, as a consequence of the constant demand for its products. As a defensive stock, it tends to remain stable during the various phases of the business cycle, and tends to perform better than the broader market during recessions.
Its current total market capitalization of $35.5 billion makes GIS a large capitalization stock (a large-cap stock has a market capitalization value of more than $10 billion) with a long history of consistent dividend payments, revenues, and earnings growth. It is considered a solid and well-diversified business with a wide economic moat and a durable competitive advantage over its rivals, which also enjoys a solid management and corporate culture. According to Yahoo! Finance, consensus estimates call for the company to earn about $3.76 per share this year, up from $3.61 per share in 2020. GIS has paid dividends to investors since 1898 and during the past twenty years the company has increased the dividends from 41 cents per share in the year 2001 to $1.98 per share in 2020.
The value of dividends reinvestment: A hypothetical investment in General Mills Inc. has grown cumulatively (including dividends reinvested) 11,360% during the past forty years. The same investment has grown only 3,840.13% in the same period of time, excluding dividends. During that time, a hypothetical investment in the S&P 500® index (through the Vanguard 500 Index Admiral (VFIAX) has grown cumulatively 7,528.31%, including dividends reinvested. According to the data and calculations of the financial website dqydj.com (don’t quit your day job), a hypothetical periodic monthly investment of $100 in GIS for the past forty years would have grown to $10,661,971, including dividends reinvested. GIS still has room for significant dividend payments and dividend increases in the coming years, since the company’s current Dividend Payout Ratio (DPR), which is its dividend payments as a percentage of its earnings, is just 51%. Its average DPR during the past five years is 61%.
Its current Price to Earnings ratio (P/E --a measure of valuation) of 14.9 is 47.1% below the US Market Index, and its Forward P/E ratio is 15.5. Its Price to Sales ratio (P/Sales) of 1.96 is 29.2% below the Market, and its Price to Cash Flow (P/Cash Flow) of 9.8 is 39.4% below the index. According to Morningstar, the stock is trading at a 2% discount, making it attractive for investors with a long-term investment horizon.
Technically (from the chart’s perspective) GIS also looks attractive, trading 20.4% below its all-time high), while it is forming a long base pattern, between $66 and $36 approximately, in which $36 is acting as a technical support level. The actively managed mutual funds American Funds Income Fund of America and American Funds American Mutual are major shareholders of GIS, holding 3.0% and 2.6% of its shares, respectively. The stock is also one of the 63 holdings of the mutual fund managed by Moneypaper Advisors, the MP 63 Fund (DRIPX). GIS’ main competitors are Kellogg Co. (K) and Conagra Brands Inc. (CAG).
General Mills’ 5-year Beta (a measure of the volatility, or systematic risk in comparison to the market as a whole as evidenced by the S&P 500® Index) is 0.55, so the stock is 45% less volatile than the Market. Best and worst years during the past 40 years: Its best year was 1991, in which GIS returned, excluding dividends, 50.3%. On the flip side, its worst year was 2018, when the stock declined 34.3% excluding dividends.
GIS’ Dividend Reinvestment Plan charges no fees for cash investing, dividend reinvestment, automatic investment or termination of the plan. With the stock being fundamental and technically attractive, this company might be an appropriate holding for investors who wish to build a holding over the long term.
Vita Nelson, www.directinvesting.com, 914-925-0022, February 2, 2021