General Mills, Inc. (NYSE:GIS) announced that it will once again increase its quarterly dividends. This announcement comes one week before it releases 3rd quarter earnings on Mar. 20. This is a strong sign of earnings growth. An increase in payouts to investors is a sign of increased profits.
The May 2013 dividend is set at $.33 per share. The dividend will increase by 15% to $.38 per share in August of 2013. The company has increased its dividend payout rate 14 times in the last 9 years. The annualized dividend yield is 3.3% based on current prices and a total $1.52 per share in dividends.
General Mills, Inc. (NYSE:GIS) has distributed dividends for the last 114 years completely uninterrupted. In the last 6 years, dividends have continued to rise. (Image from General Mills corporate website.)
Based on the increased dividend payout rate, this stock is an excellent candidate for investors who are focused on dividends. This dividend growth is already priced in to the stock, but future dividend growth will mean higher stock prices.
Based on the dividend growth and the dividend discount model, the 1 year price target for General Mills is $53.12 per share.
Future earnings growth is slowing down. There will likely only be mid-single digit growth in the next year. General Mills recently acquired Yoplait yogurt brand as well as a Brazilian company Yoki. General Mills, Inc. (NYSE:GIS) has already seen a 9% rise in yogurt sales due to the acquisition. One major issue facing General Mills – and the food industry as a whole – is rising food costs. As the global economy continues to grow, food and food products are in higher demand. Fuel, energy and transportation costs only add to the rising food costs that General Mills must overcome.
General Mills, Inc. (NYSE:GIS) is launching new breakfast products for consumers on the go. It is focusing on breakfast drinks to add to cereal sales.
Based on estimates, earnings for General Mills this past quarter should come in around $.56 per share. Because of rising food costs, General Mills will likely only see 4-6% growth in the next year.
Still, earnings growth is positive. And as a result of this growth, the company has a dedication to returning profits to investors. The dividend increase announcement is a positive sign of future earnings.