GENERAL MILLS INC. $49 (New York symbol GIS, Conservative Growth Portfolio, Consumer sector; Shares outstanding: 644.3 million; Market cap: $31.6 billion; Price-to-sales ratio: 1.9; Dividend yield: 3.1%; TSINetwork Rating: Above Average; www.generalmills.com) is one of the world’s largest food makers. Its top brands include Big G (cereal), Green Giant (canned and frozen vegetables), Pillsbury (baking dough), Old El Paso (tacos) and Progresso (soups and sauces).
In its fiscal 2013 third quarter, which ended February 24, 2013, General Mills’sales rose 7.5%, to $4.4 billion from $4.1 billion a year earlier. That’s mainly due to Yoki, a Brazilian snack food and seasoning maker that General Mills bought in August 2012. Without acquisitions, sales would have risen 2%.
Earnings rose 14.9%, to $420.9 million from $366.4 million. Earnings per share rose 16.4%, to $0.64 from $0.55, on fewer shares outstanding. These figures exclude a number of unusual items, such as costs to integrate new operations, and gains and losses on hedging contracts that General Mills uses to lock in prices of certain ingredients.
The company’s strong balance sheet gives it plenty of room to make more acquisitions. It ended the quarter with $6.6 billion of long-term debt, which is just 21% of its market cap. It also held cash of $751.2 billion, or $1.17 a share.
General Mills recently raised its quarterly dividend by 15.2%, to $0.38 a share from $0.33. The new annual rate of $1.52 yields 3.1%. This was the 14th time the company has increased its dividend since 2004. General Mills has also paid dividends for 114 straight years and has never cut its payout.
The stock trades at a reasonable 18.2 times the $2.69 a share that it should earn in fiscal 2013.
General Mills is a buy.
