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General Mills, Inc. (GIS): Low Beta Stock With a Good Upside Potential

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Last Month, General Mills, Inc. (NYSE:GIS), the world’s 9th-largest producer and marketer of packaged food and the 5th-largest in the United States, announced impressive FY13 results with 7% growth in the top line and 19% growth in its bottom line. As a result, the stock has seen some positive momentum and has traded up 7% over the last month.

General Mills, Inc. (NYSE:GIS)General Mills, Inc. (NYSE:GIS) is known for breakthroughs in food technology and keeps on launching new products. The company was founded in 1928 and over the last 80 years it has grown into a truly diversified food company that participates in many categories including cereals, yogurt, refrigerated dough, baking mixes and Mexican food. Its brands include Big G cereals, Betty Crocker, Pillsbury, Progresso, Hamburger Helper, Yoplait, and Old El Paso.

The company has expanded its international presence with the acquisition of the Brazilian food company Yoki and Yoplait International and as a result the international segment saw a tremendous 25% year over year revenue growth in the last quarter.

Overall, I remain optimistic about General Mills, Inc. (NYSE:GIS) given its strong market share positioning in some leading food categories, focus on innovation, growing international presence and strategic acquisitions. I feel the stock may see a further upside from the current levels.

Safe Bet for Dividend Investors

General Mills, Inc. (NYSE:GIS) is an extremely safe company for dividend investors. The company has also been generous in returning cash to its shareholders with consistent year over year dividends for the last 80 years. General Mills has managed to increase its annual dividend payments by at least 8% annually over the last four years. Last year, the company saw a 22% increase in cash flow from operating activities and returned nearly $1.9 billion in cash to shareholders through dividends and share repurchases.

The current dividend yield stands at 3% which is the best-in-class when compared to its peers like Kellogg Company (NYSE:K) and Campbell Soup Company (NYSE:CPB). Let’s have a look at the dividend yield and payout ratio of these three companies.

Company Kellogg Campbell Soup General Mills
Dividend Yield 2.6% 2.5% 3.0%
Payout Ratio 69% 49% 47%

We can see that not only General Mills, Inc. (NYSE:GIS) offers the best dividend yield, it also has the lowest payout ratio as compared to Kellogg Company (NYSE:K)’s and Campbell Soup Company (NYSE:CPB). Moreover, General Mills offers an unusually low beta of 0.15 which indicates that the stock is relatively far less volatile (or far more stable) than the overall market. Let’s compare its beta with Campbell soup and Kellogg.

Company Kellogg Campbell Soup General Mills
Beta 0.45 0.31 0.15

Thus, a impressive dividend yield at a low payout ratio coupled with an extremely low beta makes General Mills, Inc. (NYSE:GIS) a safe bet for dividend investors while also offering a good upside potential.

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