Tuesday, August 5, 2014

General Mills (GIS) 2014 Review

General Mills Inc. processes and markets such well known products as Cheerios, Wheaties, Total, Chex, Betty Crocker, Bisquick, Hamburger Helper, Yoplait and Progresso.  The company has grown profits and dividends at a 9-10% pace over the last ten years earning a 20%+ return on equity.  This performance should continue as a result of:

            (1) an outstanding portfolio of fast growing brands

(2) a steady pipeline of new products which enhance sales and take market share,

(3) an aggressive cost cutting program,

(4) expansion into emerging markets which should account for 70% of food growth through 2012,

(5) acquisitions,

(6) management is committed to enhancing shareholder value via increasing dividends and share buy backs.

Negatives:

(1) GIS international exposure increases the risk of loss from currency fluctuation,

(2) during periods of economic malaise, consumers tend to trade down to generic brands,

(3) rising commodity costs,

(4) softness in its yogurt and cereal businesses.

GIS is rated A+ by Value Line, has a 53% debt to equity ratio and its stock yields 3.2%

     Statistical Summary

                Stock       Dividend         Payout      # Increases  
               Yield      Growth Rate     Ratio       Since 2004

GIS           3.2%           8%              52%              10
Ind Ave     2.4              8                  36               NA 

                Debt/                        EPS Down       Net        Value Line
                 Equity        ROE      Since 2004      Margin       Rating

GIS           53%            30%            1                 11%          A+
Ind Ave     37               13              NA               7              NA

        Chart
           
            Note: GIS stock made great progress off its March 2009 low, surpassing the downtrend of its September 2008 high (straight red line) and the November 2008 trading high (green line).  Long term, GIS is in an uptrend (blue lines); intermediate term, it is in an uptrend (purple lines).  The wiggly red line is the 50 day moving average.  The Dividend Growth Portfolio owns a 50% position in GIS, having Sold Half in early 2013.  The upper boundary of its Buy Value Range is $31; the lower boundary of its Self Half Range in $44.


           

8/14

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