This is Why General Mills (GIS) is a Great Dividend Stock
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
General Mills in Focus
Headquartered in Minneapolis, General Mills (GIS) is a Consumer Staples stock that has seen a price change of 21.95% so far this year. The maker of Cheerios cereal, Yoplait yogurt and other packaged foods is currently shelling out a dividend of $0.54 per share, with a dividend yield of 2.63%. This compares to the Food - Miscellaneous industry's yield of 0.11% and the S&P 500's yield of 1.6%.
Looking at dividend growth, the company's current annualized dividend of $2.16 is up 5.9% from last year. Over the last 5 years, General Mills has increased its dividend 2 times on a year-over-year basis for an average annual increase of 1.10%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. General Mills's current payout ratio is 53%. This means it paid out 53% of its trailing 12-month EPS as dividend.
GIS is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $4.09 per share, which represents a year-over-year growth rate of 3.81%.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, GIS presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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General Mills, Inc. (GIS) : Free Stock Analysis Report
