The Board of Directors of General Mills Inc. (GIS) announced a new share repurchase program and increase in dividend.
 
General Mills received an authorization from its Board to repurchase about 100 million shares. The new program replaces the previous authorization approved in December 2006, and has no expiration date. During the first nine months of fiscal 2010, General Mills repurchased 5.5 million of the company’s shares at a price of $58.49 per share.
 
The company’s Board also approved an increase in the quarterly dividend to 28 cents a share, bringing the annualized dividend rate to $1.12, reflecting an increase of 17% compared with 96 cents paid in fiscal 2010. The fiscal 2011 dividend pay-out corresponds to a 3% dividend yield. The dividend is payable on August 2, 2010, to shareholders of record July 12, 2010. The company had last raised its dividend on December 14, 2009 by 12%.
 
The company has a consistent track record of 111 years of dividend payment, which reflects its healthy financial position.
 
As the economy is coming out of recession, the companies hoarding huge cash continue to reward shareholders through share repurchases and dividend increases. These strategies not only increase shareholders’ return but also raise the market value of the remaining shares. The dividend increase represents the company’s strong financial status and optimistic long-term outlook.
 
General Mills had cash and cash equivalent of $691 million at the end of third quarter fiscal 2010.  General Mills generated $1.56 billion of cash flow from operating activities in the first nine months of fiscal 2010, up compared with $1.13 billion in the period a year ago, due to strong net earnings growth. During the first nine months of fiscal 2010, the company’s capital expenditure was $419 million.
 
Based in Minneapolis, General Mills is a producer of packaged consumer food. Despite the sluggish environment, the company’s food brands continue to perform well, reflecting product enhancement, marketing strategies, and growth in under penetrated markets.
 
General Mills shares maintain a Zacks #3 Rank, which translates into a short-term Hold recommendation. Our long-term recommendation for the stock remains Neutral.

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