Dividend Stock #4 To Protect Your Retirement Portfolio – General Mills
Over the last couple months, I’ve shown you stocks to avoid…
Stocks to consider buying…
And some of the best stocks related to the coming Internet of Things… Which you can find linked further below.
All these recommendations are to help you either avoid pain and terrible stocks. Or to help you find potentially great stocks to invest in during this pandemic.
If you do both well, it helps you earn higher than average investment returns and build wealth.
Because the fewer investment losses you have the more capital you keep. And the more capital you keep the faster you compound your money.
Today, I want to help you figure this out by telling you Why This 3.3% Dividend Stock Is A Must Buy.
General Mills (GIS) is one of the world’s largest packaged foods companies.
Some of its largest brands are ones we use every day…
- Nature Valley
- Old El Paso
- Betty Crocker
These food staples helped it survive and thrive during the worst of the pandemic. Its brands are so powerful that its revenue rose last year to $18.63 billion… Even during the worst economic situation we’ve seen in 100 years.
And they’ll help General Mills continue doing well for decades to come.
Because of this enormous competitive advantage, I wanted to highlight its stock today to help you figure out whether you should buy it or not.
But this is in the past and it doesn’t help us figure out if it’s a great buy now…
That’s what I want to help you figure out today.
It’s based in Minneapolis Minnesota. It has a $37.46 billion market cap. And it pays a 3.3% dividend… Which is reason #1 to consider buying its stock.
General Mills 3.3% Dividend
Over the last decade General Mills paid out a total of $16.46 per share in dividends.
At today’s share count of 619 million shares that’s equal to $10.19 billion paid out to shareholders in that time.
It also grew its dividend 78.6% from $1.12 per share in 2011 to $2 per share now.
These dividend payments will help you in normal times earn cash if you take the money out. Or allow you to buy more shares over time if you reinvest the dividends.
The regular payments will help you earn more money for your retirement. And the solid, stable, and growing dividends will help in any kind of prolonged economic issues like we’re dealing with today.
It can do this because it earns solid profits. Which is reason #2 to consider General Mills for your retirement portfolio.
General Mills Earns Large Profits
Over the last decade it earned an average operating income margin of 16.7% per year.
I look for anything above 10% on a consistent basis so this is great.
Another way to show this is with its free cash flow to sales ratio (FCF/Sales). Over the last decade its 11.8% per year on average.
I call this the “Cash Machine” metric.
I look for anything above 5% on a consistent basis for the same reasons as I look for high operating profit margins above. If a company surpasses both thresholds it makes it a great operating business that is safe and ultra-valuable.
These are both well above the minimum thresholds I look for which make General Mills one of the best operating businesses on Earth.
This already adds a large margin of safety to investing in General Mills… Another thing the high profits, is that they allow General Mills to have reasonable debt levels.
General Mills Has Reasonable Debt
As of this writing GIS has $2.75 billion in cash compared to $13.85 billion in debt.
As a percentage of its balance sheet total liabilities make up 72.5%.
Debt makes up 37% of its market cap.
And its debt-to-equity ratio is 1.1.
These fall slightly above the thresholds I look for. As one example, I want debt to equity ratios to be below 1.
But its not a huge deal here because of General Mills consistently great profits and cash flows.
So far, General Mills looks like a great potential stock to buy… But what about its valuation?Is it cheap enough to buy?
General Mills IS Cheap…
With the markets at or near all-time highs you’d expect a fantastic stock like General Mills to be selling at an enormous valuation.
But it’s not…
As of this writing its P/E is 15.
Its P/CF is 10.3.
Its forward P/E is 16.4.
And its enterprise value to operating income – EV/EBIT is 13.8.
On all three metrics at the top, I look to buy investments below 20 to consider them undervalued.
And on EV/EBIT I look to buy stocks below 8.
These metrics show that General Mills is undervalued right now when you consider them together.
And this means owning its stock does give you a large margin of safety in investing terminology.
When you invest in stocks that have a margin of safety it makes the investment safer. And it also means you should expect to earn higher returns owning it in the coming years.
The inverse of this is also true…
When you invest in a stock without a margin of safety it makes the investment riskier. And it also means you should expect to earn less owning its stock going forward.
With General Mills being undervalued right now, its stock offers you a large margin of safety… Especially when you consider all the other great things above.
If you’re looking for a solid, safe, dividend paying, stable, and enormously profitable investment to buy to earn high and safe returns for your portfolio – consider investing in General Mills.
Also consider some of the other investments below.
But before you do that, I need to let you know something else… On April 5th we’re revamping this newsletter to better serve you.
You’ll now have more analysis and commentary coming your way regularly… In an easier to read format… All so we can help you protect and grow your wealth safely during these uncertain times.
As of this writing, General Mills still looks like a great stock to potentially consider buying.
- It has enormous competitive advantages.
- It earns massive profits and cash flows.
- It dominates its industry.
- Its cheap.
- And it pays you a large and growing dividend.
These are the exact kinds of stocks you must consider buying right now with the various risks in the market that I’ve talked about at length in the last few weeks.
If you’ve missed any of those articles, here are the main risks I’ve talked about at length the last few weeks.
- Stock market valuations at or near all-time records.
- Inflation is rising rapidly.
- Debt levels continue to go straight up and now sit at a combined $281 trillion worldwide.
- Interest rates are rising.
- Unemployment is rising again…
- And so are Covid cases and deaths.
It’s not just one large risk out there right now… There’s many… And almost no one else is telling you about any of this.
Because of all the risks out there right now, I sent you this article in case you missed it.
And I hope you consider investing in General Mills stock to protect your retirement portfolio… Before any kind of market crash.
Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.