Last update on 2024-06-27

General Mills (GIS) - Dividend Analysis (Final Score: 8/8)

Analysis of General Mills (GIS) dividend stability with a perfect 8/8 score. Insight into superior Dividend Yield, Growth, and payout sustainability.

Short Analysis - Dividend Score: 8

We're running General Mills (GIS) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

General Mills (GIS) excels in its dividend policy according to an 8-criteria scoring system, earning a perfect score. The company's dividend yield is significantly higher than the industry average, making it an attractive option for income-focused investors. The dividend growth rate of 7.73% over the last 20 years suggests robust financial health and a commitment to shareholder returns. A payout ratio averaging 53.9996% is well below the 65% threshold, indicating sustainability. Dividends are generally well-covered by earnings and free cash flow, enhancing reliability. Stability is demonstrated by consistent dividend payments since 1998, most years showing growth. Additionally, General Mills has a credible record of stock repurchases in 14 of the last 20 years, further supporting shareholder value. GIS portrays strong financial health and an investor-friendly approach, ensuring confidence in steady and potentially growing dividend income. Despite occasional fluctuations, the overall trend remains favorable.

Insights for Value Investors Seeking Stable Income

Based on this comprehensive analysis, General Mills (GIS) appears to be a worthwhile consideration for income-focused investors. The company's ability to maintain and grow its dividend while keeping payout ratios sustainable indicates a solid financial foundation. The history of dividend stability and stock repurchases strengthens the case for investing in GIS for reliable and potentially increasing income. However, as with any investment, it's essential to consider other factors and conduct a thorough personal analysis before making a decision.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Explain the criterion for General Mills (GIS) and why it is important to consider

Dividend yield of 3.4695% is significantly higher than the industry average of 1.77%. This suggests that General Mills is offering a more substantial income return to investors compared to its industry peers, making it attractive for income-focused investors. Over the past 20 years, GIS's dividend yield has seen both peaks and troughs, reflecting phases of higher attractiveness (e.g., 2018 with 5.0334%) and periods aligned more closely with industry norms. Given the current yield surpassing the industry average consistently, it indicates a stable and potentially growing dividend trend. Notably, the company maintained robust payouts per share ($2.26 in 2023) even when stock prices fluctuate, enhancing investor confidence.

Average annual Growth Rate higher than 5% in the last 20 years?

Examining the dividend growth rate over a 20-year period helps investors understand the consistency and reliability of a company's dividend policy. A growth rate higher than 5% generally indicates robust financial health and a shareholder-friendly management.

The average dividend growth rate for General Mills (GIS) over the last 20 years is approximately 7.73%. Given that the benchmark for positive growth is 5%, General Mills surpasses this threshold. Despite certain fluctuations, with some negative growth years such as -17.95% in 2005 and -14.29% in 2017, the overall trend is positive. This performance suggests that General Mills has been able to increase its dividends effectively over the long term, indicating strong profitability and a commitment to returning value to its shareholders. Therefore, the dividend growth rate can be considered a good trend for the company.

Average annual Payout Ratio lower than 65% in the last 20 years?

The Payout Ratio measures the percentage of earnings paid to shareholders in dividends. A ratio below 65% is generally considered sustainable.

General Mills (GIS) has an average payout ratio of 53.9996% over the last 20 years. This indicates that, on average, the company has distributed roughly 54% of its earnings as dividends. Such a payout ratio being below 65% is generally considered sustainable, indicating a cautious and prudent approach to reward shareholders while retaining the majority of earnings for reinvestment and operational stability. Noticeably, while specific years like 2015 (109.2539%) and 2016 (66.9739%) exceeded the 65% threshold, these instances are outliers rather than the norm. These anomalous years might have coincided with special payouts or unique financial circumstances, but the overall consistency around or below the 65% mark is a positive trend.

Dividends Well Covered by Earnings?

The significance of General Mills' dividends being well covered by earnings lies in ensuring sustainability and consistency in dividend payments. Well-covered dividends indicate that the company’s earnings are sufficient to pay its dividends, which makes the dividends more reliable for investors.

General Mills' earnings per share (EPS) from 2003 to 2023 shows a generally upward trend, with some fluctuations. In 2023, EPS was 4.361 compared to 1.213 in 2003, signifying substantial growth. Meanwhile, dividends per share also increased, from 0.55 in 2003 to 2.26 in 2023. The ratio of dividends covered by earnings per share saw significant variability, from a low of 0.316 in 2005 to a high of 1.09 in 2015. However, a ratio consistently above 0.5 across many years indicates that the company's earnings have mostly been sufficient to cover dividends. The overall positive trend, with only few years where the EPS barely covered dividends, suggests good financial health and a reliable dividend payment ability. This trend is considered favorable for investors seeking stable dividend income.

Dividends Well Covered by Cash Flow?

The cash flow criterion is crucial as it reveals if the company can support its dividend payments from its cash generated. This can indicate its profitability and financial health.

General Mills' (GIS) ability to cover its dividends from free cash flow fluctuated over the years with percentages such as 83.08% in 2011 and 35.54% in 2005. Ideally, lower ratios indicate stronger coverage, such as in 2003 (44.13%) versus poorer years like 2011 (83.08%). On balance, healthier coverage like 2023's 61.65% suggests relatively secure dividend payouts. A company's consistency in maintaining a ratio ideally below 60-70% demonstrates reliability. Therefore, GIS shows relatively good performance, though some years posed challenges, especially around 2005–2011.

Stable Dividends Since the Company Began Paying Dividends?

The stability of dividends over an extended period is crucial for income-seeking investors because it reflects the company’s ability to generate consistent cash flow and profitability. A reduction of more than 20% in any year could indicate financial or operational turmoil, leading to reduced investor confidence.

Upon analyzing General Mills' dividend per share over the last 20 years, the data reveals consistency, with only a few fluctuations. However, in 2005, there's a notable drop from 0.585 to 0.48 per share, representing a decline of approximately 18%. Despite this, for the majority of the years, the dividends have not only been stable but have shown a growth trajectory, rising from 0.55 in 2003 to 2.26 in 2023. Overall, this trend is positive, demonstrating the company's commitment to returning value to shareholders, with only minor hiccups, thereby ensuring investor trust.

Dividends Paid for Over 25 Years?

Analyzing the history of dividends paid over an extended period helps ascertain a company's commitment to returning capital to shareholders and indicates financial stability and business model sustainability.

General Mills (GIS) has an impressive history of paying consistent dividends for over 25 years, as evidenced by the data from 1998 to 2023. With the dividend per share gradually increasing from $0.53 in 1998 to $2.26 in 2023, this trend signifies a strong endorsement of the company's profitability and commitment to shareholders. The years where dividends either increased or stayed stable with no reductions, underline a robust financial strategy. This stable and rising dividend payment trend is particularly significant for income-focused investors looking for reliability. The only variation worth noting is the spike and subsequent reduction during 2014-2016, but the overall rising trajectory resumed thereafter. Overall, the trend is positive and suggests good financial health and shareholder value enhancement.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases mean that the company regularly buys back its shares from the market. It reduces the number of shares outstanding, increasing the value of remaining shares. This can signal confidence in company's future and enhance shareholder value.

Over the past 20 years, General Mills (GIS) has shown a fairly consistent pattern of stock repurchases in 14 out of those 20 years. The years with stock repurchases include several consecutive years, indicating a commitment to returning value to shareholders. An average repurchase trend of -1.1479 implies a reduction in the number of shares outstanding, which can be a good indicator of share value enhancement. The relatively steady decrease in shares outstanding, except for slight increases in 2019 and 2020, supports a positive long-term trend. The practice of buybacks during this period can be seen as a good sign for investors, suggesting that the company is focusing on boosting share price and returning capital to shareholders.