Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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 16.47% 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 2.75%. This compares to the Food - Miscellaneous industry's yield of 0.13% and the S&P 500's yield of 1.78%.
Looking at dividend growth, the company's current annualized dividend of $2.16 is up 5.9% from last year. In the past five-year period, General Mills has increased its dividend 2 times on a year-over-year basis for an average annual increase of 1.10%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, General Mills's payout ratio is 53%, which means it paid out 53% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, GIS expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $4.08 per share, with earnings expected to increase 3.55% from the year ago period.
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.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. 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
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