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Analyst Blog

The board of directors of General Mills Inc. (GIS - Analyst Report) recently announced a 15% increase in the consumer food company’s dividend, its 14th hike in the quarterly dividend rate since 2004.

The quarterly dividend was increased from 33 cents to 38 cents per common share, equivalent to an annual dividend of $1.52 per share for fiscal 2014, up from $1.32 per share for fiscal 2013. The new dividend will yield 3.3% annually.

The increased quarterly dividend will, however, be payable from Aug 2013. General Mills’ board also declared that they will pay a quarterly dividend of 33 cents for the last quarter of fiscal 2013 on May 1 to shareholders of record as on Apr 10.

General Mills has consistently enhanced shareholders’ return via share repurchases and dividends. In fact over the past four years, General Mills delivered a compound annual return of 12% to shareholders. Shareholder dividends have augmented at a compounded growth rate of 11% over the past five fiscal years.

General Mills increased its annual dividend payments for fiscal 2011 by 17% and for fiscal 2012 by 8% from the prior year, respectively. Moreover, the company has maintained its consistent record of repurchasing shares, which totaled $1.2 billion in fiscal 2011 and $313 million in fiscal 2012. Share re-purchasing activity is expected to be higher in fiscal 2013 than in 2012.

General Mills carries a Zacks Rank #4 (Sell). We are encouraged by the company’s strong market share position in some leading food categories, its strengthening international presence, strategic acquisitions and focus on innovation and brand support. These growth initiatives combined with the cost saving efforts bode well for the company’s long-term growth. However, we prefer to remain on the sidelines until the U.S. retail volumes improve substantially, the Yoplait yogurt business delivers and the macroeconomic environment recovers.

Other Stocks to Consider

Some stocks going strong in the food industry are Flower Foods Inc (FLO - Snapshot Report) and J&J Snack Foods Corp (JJSF - Snapshot Report), both carrying a Zacks Rank #1 (Strong Buy) and ConAgra Foods, Inc (CAG - Analyst Report) carrying a Zacks Rank #2 (Buy).

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