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The Recently Recommended Monthly Stock Special
Recently Recommended

The recently recommended company is *General Mills Inc. (GIS)

Comparison GIS (recently recommended stock of the month) vs SP500 (by Vanguard SP500 Index Fund) in the last 10 years.

Company Information:

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 a constant dividend and stable earnings, regardless of the state of the overall stock market, because 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 $32.0 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 diversified business with a durable competitive advantage over rivals, which also enjoys solid management and corporate culture. According to Yahoo! Finance, consensus estimates call for the company to earn about $3.14 per share this year, up from $3.11 per share last year, and to go to about $3.30 per share next year. The company has paid dividends to investors since 1898 and has increased its payments for fifteen consecutive years. During the past five years has increased its dividends at an average rate of 4.9%. Its quarterly payment of $0.49 per share currently provides a yield of 3.67%.

 

The value of dividends reinvestment: A hypothetical investment in General Mills Inc. has grown cumulatively (including dividends reinvested) 10,663.44% during the past forty years. The same investment has grown only 3,833.74% in the same period of time, excluding dividends. During the same period, a hypothetical investment in the S&P 500® index (thru the Vanguard 500 Index Admiral (VFIAX) has grown cumulatively (including dividends reinvested) 7,636.90%. The stock exhibits a Dividend Payout Ratio (DPR is the proportion of earnings paid out as dividends to shareholders) of 77.0%, which means the company is paying out 77.0% of all its net income in dividends and is retaining a percentage of earnings to reinvest or grow the business. Its Price to Sales ratio (P/Sales) of 1.94 is 8.9% below the index and its Price to Cash Flow of 11.8 is 10.9% below the index. According to Morningstar, the stock is trading 8% below its Fair Value Estimate, making it attractive for investors with a long-term investment horizon.

 

Technically (from the chart’s perspective) GIS also looks attractive, after clearing a thirteen-month price consolidation pattern with above-average volume in March. Despite its price breakout, the stock is still trading 26.8% below its all-time high. The index funds Vanguard Total Stock Market Index and Vanguard 500 Index are major shareholders of GIS, holding 2.7% and 1.9% 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). GIS’ 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 0.94 so the stock is 6% 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 is an appropriate holding for investors who wish to build a holding over the long term.

 

Disclosure: Mario Medina is a long-term investor in General Mills Inc., which was mentioned in this article and his investment strategy consists of investing small amounts periodically (also known as dollar cost average --DCA), with a long-term view. The author is the co-manager of the MP 63 Fund (DRIPX), which also holds a position in the company. The author wrote the article himself and it expresses his own opinions. The author has no business relationship with GIS and this article is not intended as a recommendation to invest as the information published does not take into account any subscriber's personal finances, goals or risk tolerance. Accordingly, you should be aware of all the risks associated with any financial investment and should consult an independent financial advisor for any personal investment advice.

 

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