Here’s a new entry to the stock selection and valuation series.
Today’s stock is General Mills – ticker symbol GIS.
General Mills, made famous from their Cheerios brand, is a consumer staples company offering many well known food and pet brands such as:
Blue Buffalo pet foods
Haagen-Daz
Yoplait
Gold Medal Flour
Nature Valley
Cascadian Farms
Pillsbury
Annie’s
Muir Glen,
Among so many more.
https://www.generalmills.com/en/Brands/Overview
Some metrics I look for –
Safety:
Dividend Safety Score – 69 – out of 99
Current Ratio (look for a number higher than 1, higher the better) – 0.80
Debt to Equity (lower the better) – 1.34
Payout Ratio – 53.70%
Estimated Earnings Growth Rate – 5 year – 4.85%
Dividend history:
Years of paying dividends: 120
Dividend growth rate – 5 year – 1.86%
Current yield: 3.18%
Current dividend: $2.04
Valuation:
DCF model: $53.78
P/E Mean Reversion: $62.36
Dividend Yield Theory: $55.74
Average of the three valuations – $57.29
Current price: $55.75 (12/03/2021)
Potential discount – ~2.76%
Analyst 1 year average price target: $63.84
Commentary:
This is a very stable consumer brand that is in demand no matter what is going on in the economy and has brands that appeal to every demographic. 120 years of straight dividend payments shows their commitment to paying dividends. The recent lack of dividend growth is disheartening, but the consistency and low dividend payout outweighs this slow growth. They bought Blue Buffalo a few years back, which they financed with a good amount of debt, so they have been actively paying that down, hence the slow dividend growth. The revenue from the acquisition is fueling their earnings growth though so it appears to have been a good purchase. The current valuation is at a fair price, but in today’s overpriced market, a fair price is not too bad.
I can’t think of a more stable company in an industry that will always be in demand.
Let me know what you think!
Disclosure: I own shares of GIS