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General Mills (GIS)
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.

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.
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.
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.
PE <12 and Dividend @ 4.55%

$40 seems to be a good base from which it broke out last time.

Sure looks like a buy here.
GIS getting killed today, but still not quite low enough for me to consider buying more. Anyone nibbling?
Not me Karim. Just no growth here to justify the Yield. It would have to come down another $5 for me to even consider. I'm actually looking at HRL right now.
Not likely for me. Consumer staples with zippo growth have to be on a total fire sale to draw my attention. It's too easy to find a growing company with a 2% (but growing) Div that is not as likely to trade in a very tight range for 5 years. The consumer staples are wonderful companies, but most of them will still take years to get truly attractive unless everyone that isn't already retired gives up no them. Which is somewhat possible IMO. I do keep them on the watch list though as now and then one will become a good deal.
I still hold GIS, but reluctantly so. I'm not a big fan of the Blue Buffalo acquisition, especially when it came at the expense of dividend growth.

Management spent billions on share repurchases over the years and then sold shares recently at multi-year lows to shore up the balance sheet after the acquisition.

Also worried about off-label and store brands continuing to eat market share away from the consumer staples group.

The yield is decent, but this company has some problems.
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That is where my concern lies Eric.  When I was your age you purchased the off brand staples for no other reason than to cut the grocery bill.  There was a very clear difference in quality and you knew you were missing out.  Now it is hard to tell the difference in many products.  There is little room to increase the costs of the brand names when it becomes necessary.   They seem to have little choice but to acquire up and coming products and hope they can expand the market share with their marketing power with consumers and the grocery chains.  The shelf space wars are brutal as I am sure you are aware.

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