General Mills, Inc. (GIS): A Buy For The Long Haul

Page 1 of 2

General Mills, Inc. (NYSE:GIS)General Mills, Inc. (NYSE:GIS) has been a great buy for many years. General Mills, Inc. (NYSE:GIS) has been continuously paying dividends over the last 114 years, something that very few companies have done. They also haven’t made a single dividend cut in the entire 114 years, which is a phenomenal track record. Recently, the company announced a 15% increase in its quarterly dividends. This increase takes its quarterly dividend to $0.38 per share.

Over the last five fiscal years, the company increased its dividends at an 11% compound rate. On top of this, over the most recent five year period, its compounded returns, both from combined dividends and price appreciation, stood at an extremely attractive 14% per year. During this same time, the average return for the S&P 500 index was 6%.

In this article, I look at the company’s business model and financial situation to examine its ability to sustain growing returns for investors. I look at its peer group to see where the company stands in the packaged foods industry.

Business model and financial analysis

General Mills, Inc. (NYSE:GIS) manufactures and markets branded consumer foods all over the globe. The company also supplies unbranded and branded food products to the commercial baking and food service industries. It was founded in 1928 and is based in Minneapolis, Minnesota. General Mills operates in three business segments, namely U.S. retail, international, and bakeries and food services. As shown in below table, all business segments are generating strong returns for the company.

Figures in billions Q3/2013 Q2/2012 Change
Net sales
U.S. Retail $2.664 $2.609 2.1%
International $1.296 $1.041 24.5%
Bakeries and food services $0.47 $0.469 0.1%
Total $4.430 $4.120 7.5%

Source: SEC filings

The company’s retail and international segments are growing year-over-year. Recently, it announced Q3 results. Its retail segment grew by 2.1% and its international segment expanded by 24.5%. At the end of Q1, the shining star of this company remains its international segment, even though the retail segment is still generating the highest revenue for the company. On a consolidated basis, General Mills, Inc. (NYSE:GIS) generated overall revenue growth of 7.5% to $4.430 billion.

Figures in millions Q3/2013 Q2/2012 Change
Operating Profit
U.S. Retail $577.3 $512.5 12.6%
International $96.1 $96.0 0.1%
Bakeries and food services $75.4 $66.5 0.1%
Total $748.8 $675.0 13.4%

Source: SEC filings

On top of this, General Mills has a strong ability to convert growth into profits for investors. The company’s cost-cutting measures are returning results in its margin improvements, which I considered an optimistic sign for the company. At the end of Q4, its total segment operating profit enlarged 11% to $749 million. With solid growth and strong margins, its Q3 net earnings grew to $398 million and diluted earnings per share (EPS) enlarged to $0.60.

Additionally, General Mills, Inc. (NYSE:GIS) has been displaying solid cash flows. Its strong growth in net income provides more potential to strengthen its cash flows. At the end of first nine months, its operating cash flows stood at $2.15 billion, up 29% from year-ago levels. Capital investments and free cash flows through the first nine months stood at $0.412 billion and $1.73 billion, respectively. Its free cash flows also indicate an increasing trend. As a result of these strong cash flows, it has increased its dividends by 9% to $652 million.

Share repurchase program

A share repurchase program is always beneficial for a company and shareholders. Shares repurchases decrease the share count, which increases the demand for the stock. Repurchases also provide more room for the company to increase dividends. General Mills is strongly working on a share repurchase program, which reflects the company’s ability to generate substantial cash. At the end of the first nine months, General Mills repurchased around 19 million shares for a total of $745 million. Presently, General Mills, Inc. (NYSE:GIS)’ outstanding shares stand at 665 million, nearly two million lower than in the past year’s third quarter.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!