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General Mills (GIS)
#1
I hadn't looked at GIS closely in a long time. For years the stalwart consumer staples have been so overvalued that I just didn't bother. But yesterday I read Tim McAleenan's recent article on GIS, and so I gave it a look today. Earnings growth is slow, and dividend raises are not likely to be exciting going forward, and the payout ratio is up around 70 percent. 

On the other hand, yield is over 4.5 percent and you get into a super stable, no nonsense, core holding DG stock at a P/E ratio of 15 or below (depending on how you squint at earnings).

I'm strongly tempted to pick some up. Would love to hear everyone's thoughts.

Thanks!
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#2
I come up with debt/equity ratio of 2.2 from their most annual report. Debt levels aren't everything but that's pretty high. I try not to let debt levels be a deal breaker but I've found that my personal avoidance of debt translates into a preference for low-debt companies.

That said, a ~4.5% dividend yield from a non-REIT is pretty nice. GIS's dividend has represented about 40%-50% of its cash flow from operations over the past three years. Capital expenditures have averaged about 30%. That gives a a 20%-30% cushion for share repurchases and management of debt principal payments. All of this makes me think that future dividends will be steady.
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#3
Also, seeing statements like this on their investor relations page is always nice:


Quote:General Mills and its predecessor firm have paid dividends without interruption for 119 years.
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#4
GIS usually trades between 14 and 19 times earnings. Even during the worst of the financial crisis, GIS managed to keep its p/e above 13. It's hard in today's market to find a quality stock trading near its average historic multiple, so GIS caught my eye as well. Although I think that at around $46, GIS would be fairly valued based on its p/e history. And the BUFF acquisition was a bit pricey, but will prove a good deal over time. The pet business is where the growth is now a days. Food and snacks has too much competition and that's what's hurting them on margins.
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