Updated 3/10/25
General Mills (NYSE: GIS) has been a staple in the food industry for well over a century. With well-known brands like Cheerios, Betty Crocker, Häagen-Dazs, and Blue Buffalo, the company has established itself as a leader in the packaged food space. While changing consumer preferences and inflationary pressures have posed some challenges, General Mills continues to be a steady option for dividend investors.
With a dividend yield higher than its historical average and a reasonable payout ratio, GIS has characteristics that income-focused investors typically look for. However, there are some financial factors to be aware of, particularly its debt levels and slow revenue growth. Let’s take a deeper look at its dividend and overall financial health.
Key Dividend Metrics
📈 Dividend Yield: 3.72% (Higher than the five-year average of 3.19%)
💰 Annual Dividend: $2.40 per share
🔄 Payout Ratio: 51.74% (Moderate and sustainable)
📊 5-Year Dividend Growth Rate: 3.2%
📆 Ex-Dividend Date: April 10, 2025
📅 Next Payment Date: May 1, 2025
Dividend Overview
General Mills has been paying dividends for decades, making it a favorite among income investors. The company’s current dividend yield of 3.72% is above its five-year average, offering an appealing return for those looking for passive income. While the yield is solid, dividend growth has been on the slower side, with an average increase of just over 3% annually over the past five years.
One of the key factors in assessing dividend sustainability is the payout ratio, which currently stands at 51.74%. This suggests that General Mills is distributing just over half of its earnings to shareholders while retaining enough capital to reinvest in the business. A payout at this level provides a good balance—offering a strong yield without putting too much strain on cash flow.
GIS has consistently paid dividends through various economic cycles, reinforcing its reputation as a stable choice for investors seeking reliable income.
Dividend Growth and Safety
A steady dividend is great, but investors also want to know if the company can maintain or grow it over time. General Mills’ dividend safety looks strong, thanks to a reasonable payout ratio and solid cash flow generation. However, dividend growth has been somewhat limited in recent years, trailing inflation and the growth rates of some other dividend-paying stocks.
Several factors suggest that GIS can continue paying and potentially increasing its dividend in the years ahead:
✔ The payout ratio of 51.74% allows room for future increases
✔ Operating cash flow of $3.58 billion provides strong coverage for dividend payments
✔ Free cash flow of $1.43 billion, though lower than operating cash flow, remains positive
While the dividend is secure, don’t expect rapid dividend hikes. The company has been conservative with increases, likely due to its focus on managing debt and reinvesting in its brands.
Chart Analysis
Recent Price Action
The stock has been on a downward trend for several months but is now showing signs of a potential reversal. After hitting a low near the $60 mark, it has climbed back to close at $64.50. The price opened at $61.60 and managed to rally, touching a high of $66.06 before pulling back slightly. This kind of price movement suggests buyers are stepping in, but there’s still some hesitation as the price struggles to push higher.
Moving Averages
The 50-day simple moving average (SMA) has been sloping downward for a while but is now starting to flatten out. The price has recently moved back above this short-term moving average, which could indicate a shift in momentum. The 200-day SMA, however, remains in a clear downtrend. The stock is still trading below this longer-term moving average, which suggests the broader trend is still bearish despite the recent bounce.
A key area to watch is how the stock behaves near this 50-day moving average. If it holds above, it could continue pushing higher. But if it fails to sustain above this level, the recent rally might lose steam.
Volume and Buying Interest
Volume has picked up recently, particularly on the green (buying) days. This suggests that there’s renewed interest from buyers stepping in at these lower levels. There was a significant spike in volume around late December and early January, which coincided with a steep drop in price. That likely indicates a period of heavy selling pressure.
Since then, volume has stabilized, and the recent uptick in price is happening on relatively strong volume. This is a positive sign because rising prices on increasing volume suggest that the move has some strength behind it. However, a breakout above key resistance levels would be more convincing if accompanied by even higher volume.
Relative Strength Index (RSI)
The RSI indicator, which measures momentum, has been rising from oversold levels. It had dipped into the lower range, indicating the stock was heavily sold off, but now it’s climbing back up. This suggests that the stock could have more room to run if momentum continues improving.
At the current level, the RSI is approaching the middle range but hasn’t yet reached overbought territory. That means there could still be some upside potential before hitting resistance, but it’s important to monitor whether RSI starts to level off or turn downward.
Key Levels to Watch
The next test for this stock is whether it can maintain its strength above the short-term moving average and continue toward the $66–$68 range, where previous support turned into resistance. If it clears that level, the 200-day moving average near $70 becomes the next major hurdle.
On the downside, if the price falls back below $62, it could indicate that this recent rally was just a temporary bounce within a broader downtrend. A retest of the recent lows around $60 would then be possible.
Overall, this chart is showing some early signs of potential strength, but the stock isn’t out of the woods yet. The next few days will be crucial in determining whether this recovery can build momentum or if resistance levels will send the price back down.
Analyst Ratings
In recent months, General Mills (NYSE: GIS) has seen a mix of upgrades and downgrades from analysts, reflecting both optimism and caution about the company’s outlook. The general consensus remains “Hold,” with an average price target of $69.06, suggesting moderate upside potential.
📈 Upgrades:
🔹 Bank of America 🏦 – Upgraded GIS from “Neutral” to “Buy” on December 13, 2024, while raising the price target from $78 to $80. The firm highlighted improving organic sales growth, particularly in the pet food segment with Blue Buffalo, and expects the company’s increased advertising in its baking division to yield stronger results.
🔹 Stifel Nicolaus 📊 – Reaffirmed a “Buy” rating on January 24, 2025, though adjusted the price target from $78 to $72. Analysts acknowledged the broader struggles in the packaged food industry but expressed confidence in General Mills’ strategic efforts to stabilize and expand its market share.
📉 Downgrades:
🔻 Mizuho Securities 📉 – Downgraded its price target for General Mills from $72 to $65 on February 10, 2025, maintaining a “Neutral” stance. The decision was driven by near-term earnings concerns, as analysts expect macroeconomic uncertainty to weigh on consumer spending and pricing power.
🔻 Wells Fargo 💳 – Lowered its price target from $68 to $64 on January 7, 2025, while keeping an “Equal Weight” rating. Analysts pointed to slowing revenue growth and potential margin compression due to rising costs in key input materials.
The mixed analyst sentiment reflects both the strengths and risks surrounding General Mills. Some see strategic initiatives and brand strength as reasons for long-term optimism, while others remain cautious about industry-wide headwinds and inflationary pressures impacting margins.
Earnings Report Summary
General Mills just released its latest earnings report, and there’s a mix of good news and some areas where the company is feeling the pressure. For the second quarter of fiscal 2025, net earnings came in at $796 million, which is a solid 34% jump from the same time last year. That translates to diluted earnings per share (EPS) of $1.42, up 39% year-over-year.
Revenue was also up slightly, with net sales reaching $5.24 billion, a 2.7% increase. The boost mainly came from higher prices and a better mix of products, which helped offset a slight dip in overall volume. The company also managed to expand its adjusted gross margin to 34.8%—a 60-basis-point improvement—thanks to cost-saving measures and price increases, despite rising supply chain costs and inflationary pressures.
Looking at how different parts of the business performed:
- North America Retail had a bit of a rough patch, with sales dipping 2% to $3.02 billion. People are still buying, but lower volume weighed on the numbers. On the bright side, operating profit edged up 1% to $731 million as General Mills focused on cutting costs.
- Pet Foods had a slight decline, with sales down 1% to $576 million. Fewer units were sold, but pricing adjustments helped soften the impact. However, the segment’s operating profit took a bigger hit, falling 8% to $120 million due to higher ingredient costs and bigger spending on marketing.
- International Sales were flat at $717 million. Europe and Australia showed growth, but weaker performance in Latin America balanced things out. Operating profit for this segment dropped 23% to $125 million, mostly due to higher costs and unfavorable currency movements.
- Foodservice was the bright spot, with sales climbing 4% to $589 million. Cereal and baked goods did particularly well. Operating profit in this division also jumped 9% to $79 million, benefiting from better pricing and an uptick in demand.
Looking ahead, General Mills gave a cautious but steady outlook for the rest of the fiscal year. The company expects organic sales to be anywhere from flat to up 1%, with adjusted operating profit growing by about 1-2%. EPS is projected to rise by 4-6%, though that depends on how inflation and supply chain disruptions play out.
Overall, General Mills is holding up well despite ongoing challenges. Earnings growth looks strong, and while some segments are struggling with higher costs, the company’s focus on pricing and cost-cutting has helped keep things on track.
Financial Health and Stability
A company’s ability to maintain its dividend depends largely on its financial strength. General Mills is a mixed bag in this regard—while it generates solid profits and cash flow, it also carries a substantial amount of debt.
Strengths
✅ Profit margins are strong, with an operating margin of 20.86% and a net profit margin of 13.08%
✅ Consistent cash flow generation, which helps support dividend payments
✅ A resilient business model that performs well in both strong and weak economic conditions
Weaknesses
🚨 High debt levels, with a total debt of $14.52 billion and a debt-to-equity ratio of 153.68%
🚨 A current ratio of 0.92, which suggests weaker short-term liquidity
🚨 Modest revenue growth of just 2% year-over-year, reflecting some struggles in the packaged food industry
Despite its high debt, General Mills has managed to generate steady cash flow. However, the company needs to keep debt under control, especially in an environment of higher interest rates.
Valuation and Stock Performance
From a valuation perspective, General Mills appears fairly priced, but it isn’t a screaming bargain.
🔹 The stock has a trailing price-to-earnings (P/E) ratio of 14.02, which is lower than historical averages
🔹 The forward P/E ratio stands at 14.64, suggesting modest earnings growth expectations
🔹 The price-to-sales ratio of 1.84 is reasonable for a consumer staples stock
🔹 The price-to-book ratio of 3.86 is somewhat high but in line with industry norms
Over the past year, General Mills’ stock has underperformed the broader market, reflecting some of the challenges in the packaged food industry. The stock hit a 52-week high of $75.90 and a low of $55.15, currently trading near $66.67.
One notable characteristic of GIS is its low volatility, with a beta of 0.05. This makes it an appealing choice for investors looking for stability rather than large price swings. While the stock isn’t deeply undervalued, it remains a solid defensive play for those prioritizing steady dividends.
Risks and Considerations
While General Mills has many positive attributes, there are some risks that investors should be mindful of:
⚠ Debt Load – The company’s high debt levels could become a bigger concern if interest rates stay elevated or refinancing costs rise. This could impact cash flow and limit financial flexibility.
⚠ Slow Growth – With revenue growing just 2% year-over-year, GIS isn’t a high-growth stock. The company may need to look for new acquisitions or pricing strategies to drive stronger results.
⚠ Changing Consumer Preferences – More consumers are shifting towards healthier, fresher, and plant-based food options. While GIS has responded with brands like Annie’s and Blue Buffalo, the competition remains fierce.
⚠ Cost Pressures – Rising costs for ingredients, labor, and transportation could squeeze margins if the company isn’t able to pass those costs on to consumers.
These risks don’t pose an immediate threat to the dividend, but they could impact long-term growth.
Final Thoughts
General Mills remains a steady choice for income investors who prioritize reliability over high growth. The company’s 3.72% dividend yield, reasonable payout ratio, and strong cash flow generation make it an attractive option for those seeking passive income.
However, investors should be aware of its high debt levels and slow revenue growth, which could limit its ability to aggressively increase dividends in the future. The stock’s valuation is fair, though not deeply discounted.
For those looking for a defensive, low-volatility stock with a solid dividend, GIS is worth considering. It may not be a stock that delivers outsized capital gains, but it remains a dependable income-generating asset in an uncertain market environment.
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