Looking from stable growth and a strong dividend? General Mills (GIS) has both.
The consumer food business is about as stable as they come, and the company pays a dividend that yields 3.1%.
Although rising commodity costs have squeezed margins a bit, earnings per share are still expected to grow by 8% in 2011 and 9% in 2012. It is a Zacks #2 Rank (Buy) stock.
Second Quarter Results
Net sales in the second quarter of 2011 were up a modest 0.8% driven by a 4% increase in international sales. Latin America surged 17% while the Asia/Pacific region grew 10%.
The gross margin did contract in the quarter due to rising commodity costs, from 41.2% of sales to 39.5%.
Earnings per share came in at 76 cents, 2 cents shy of the Zacks Consensus Estimate. It was also a penny below Q2 2010 EPS.
Outlook
Management reiterated its 2011 EPS guidance of $2.46 – $2.48 following second quarter results. The Zacks Consensus Estimate is at the upper end of that range at $2.48. This represents solid 8% growth over 2010 EPS.
The 2012 consensus estimate is $2.69, equating to 9% EPS growth. It is a Zacks #2 Rank (Buy) stock.
Returning Value to Shareholders
General Mills generates strong cash flow and has been rewarding shareholders through stock buybacks and dividend increases.
During the first half of 2011, for instance, the company spent a whopping $963.6 million repurchasing 26 million shares of stock.
It also pays a dividend that yields an attractive 3.1%. Over the last 10 years, the company has raised it at a compound annual growth rate of 7.4%.
The stock has missed out on the market rally since September due to fears over rising commodity costs:
Because of this, shares trade at just 14.4x forward earnings, a discount to the industry average of 14.9x.
General Mills is headquartered in Minneapolis, Minnesota and has a market cap of $22.7 billion.
Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.
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