Wednesday, September 07, 2011

General Mills (GIS , Dividend Growth Portfolio)

General Mills Inc. (GIS) processes and markets such well known products as Cheerios, Wheaties, Total, Chex, Betty Crocker, Bisquick, Hamburger Helper, Yoplait and Progresso. The company has grown profits and dividends at a 5-8% pace over the last ten years earning a 20%+ return on equity. However, the growth rate of both earnings and dividends should increase as a result of:

(1) a steady pipeline of new products which enhance sales and take market share,

(2) an aggressive cost cutting program,

(3) expansion into emerging markets which should account for 70% of food growth though 2012,

(4) management is committed to enhancing shareholder value via increasing dividends and share buy backs.


(1) GIS international exposure increases the risk of loss from currency fluctuation,

(2) during periods of economic malaise, consumers tend to trade down to generic brands.

GIS is rated A+ by Value Line, has a 44% debt to equity ratio and its stock yields 3.2%

Statistical Summary

Stock Dividend Payout # Increases
Yield Growth Rate Ratio Since 2001

GIS 3.2% 9% 45% 7
Ind Ave 2.9 6 42 NA

Debt/ EPS Down Net Value Line
Equity ROE Since 2001 Margin Rating

GIS 44% 29% 1 11% A+
Ind Ave 37 18 NA 7 NA


Note: GIS stock made good progress off its March 2009 low, surpassing the down trend off the September 2008 high (red line) and the November 2008 trading high (green line). Long term GIS is in an up trend (straight blue lines). In June 2011, the stock broke its intermediate term up trend and re-set to a trading range (purple lines). The wiggly blue line is on balance volume. The Dividend Growth Portfolio owns a one half position in GIS by virtue of having Sold Half ($34) in June 2010. Shares would be Added at $28; the lower boundary of its Sell Half Range is $40.