General Mills Inc (NYSE:GIS), one of the largest packaged food companies, is widely spread around the globe. Its brands include Cheerios, Fiber One, Haagen-Dazs, Nature Valley, Yoplait, Betty Crocker, Pillsbury, Green Giant, Old El Paso, Wanchai Ferry, Yoki and more. Headquartered in Minneapolis, Minn., USA, General Mills had fiscal 2014 worldwide sales of US $17.9 billion.
General Mills' intrinsic value is $63 per share. Most importantly, the current levels provide investors with a very reasonable entry price for an outstanding dividend growth stock. On average, General Mills has provided an average ROE of 27% over the past five years (2009-2013).
The company has rich shareholder-return policies. The company managed to return approximately $ 1.5 billion to its shareholders in 2013, including $744 million of share repurchases and $867 million of dividends. The share buybacks are likely to fuel EPS growth for the company. The company is expecting its EPS for FY2014 to be $2.87-$2.90, as compared to $2.72 in FY2013.
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- GIS 15-Year Financial Data
- The intrinsic value of GIS
- Peter Lynch Chart of GIS
Decent Dividend Payout
General Mills actually provided two dividend hikes. The first date of record was in July 2013 ($0.38 from $0.33) and the recent announcement with a date of record in April ($0.41 from $0.38). This brings the annual dividend increase for FY 2014 to 17% ($1.55 from $1.32), which is not bad for a 115-year dividend paying stock.
This means General Mills has provided 11% compounded growth in its dividend over the past 10-years, and even higher over the past 3- and 5-year period. General Mills was able to increase its dividend throughout the recession at just about a double-digit pace for 2008 (10%), 2009 (9%) and 2010 (12%). GIS has consistently paid a dividend for 115 years.
GIS is constantly bringing in new and innovative products for both the U.S. and international segments to increase volumes and improve revenues. Furthermore, the company has laid out its plan to stay on track to expand its bottom-line through efficient cost cutting efforts. The company's continuous efforts to introduce new and innovative products in the fast-growing food categories will portend well for its long-term growth prospects.
GIS has successfully mapped out its plan to grow the top-line and margins through the renovation of its core products, constant innovation and successful advertising of these products. The company plans on bringing in innovation in the Canadian cereal category with the launch of its ancient grains variety of Cheerios. Moreover, in the Canadian Greek yogurt market, the company is planning to capitalize on growing consumer interest in natural sweeteners by introducing the new Yoplait Source Yogurt. With these new launches in Canada, GIS will increase its Canadian market share.
The company also remains committed to lowering the cost burden through bringing in constant improvements in its supply chain. I believe the future supply chain efficiencies, coupled with the improved sales base of GIS, will also help expand its long-term margins.
Consumer Trends Fueling Innovation
The newest lineup of products from General Mills builds upon another strong year for innovation. New items launched in Fiscal 2014 drove nearly 5 percent of the company's net sales in U.S. Retail according to A.C. Nielsen. In addition, eleven General Mills products – including Yoplait Greek 100, Fiber One Protein Bars, Honey Nut Cheerios Medley Crunch and Green Giant Frozen Steamers – were ranked among the top-selling 100 new food products of 2013 according to Information Resources Inc.'s (IRI) New Product Pacesetters Report.
This year, protein-packed cereal and yogurt, snacks and convenient meals with bold and indulgent flavors, whole grain and gluten-free food options are key consumer-driven product themes poised to drive growth for General Mills.
Meeting gluten-free needs
It is estimated that around 30 percent of consumers are trying to cut back on gluten. Consumers who follow a gluten-free diet continue to seek great tasting, gluten-free foods. General Mills adds to its extensive gluten-free portfolio with:
- Chex Gluten Free Oatmeal - For the first time, Chex brings one of America's favorite breakfast meals to the homes of gluten-free eaters with its all new Chex Gluten Free Oatmeal in Maple Brown Sugar, Apple Cinnamon, and Original flavors.
- Betty Crocker Gluten Free Pizza Crust – Expanding into new gluten-free meal occasions, Betty Crocker introduces Gluten Free Pizza Crust mix, which is in high demand among gluten-free consumers.
- LARABAR RENOLA - LARABAR is reinventing granola with the launch of the first nationally distributed, grain-free granola, called RENOLA. Made with simple ingredients including nuts, fruit and seeds, it is available in three flavors: Cinnamon Nut, Cocoa Coconut and Berry.
As consumers are becoming more health conscious, food companies are aggressively working on product innovation. GIS has also been taking product innovation measures. GIS is focusing on offering products that are free from artificial preservatives and are more natural.
The company has been making efforts to expand its international operations, which will offer growth for its top and bottom lines. Also, product innovation remains another important growth driver for the company, which will positively affect its sales volume.
General Mills has been an incredibly consistent company. More than that, as of late it seems that the commitment to shareholders has been increasing. Moreover, during the last decade General Mills has shown an increased propensity to reward shareholders through share repurchases and dividends. Additionally, the company is expected to grow at a solid clip moving forward.