Monday, March 28, 2011

General Mills symbol GIS Dividend Machine March 28, 2011

English: General Mills's logo.
English: General Mills's logo. (Photo credit: Wikipedia)

Invest in companies that produce the things you use.

When you buy a product, it is nice to share in some of the end profit; sort of like a rebate.   In order to fulfill our true objective of creating ever increasing dividend income, we have to invest in companies that not only produce goods that we use but also pay us a piece of the profit in dividends.

Although you may buy a lot of Apple products, you cannot invest income producing money in Apple because it does not share profit. Apple is a growth strategy and the portion of your portfolio that is designated to creating income must be invested in companies that pay a dividend.  In that vain I profiled KMB as one of my dividend machines because a lot of you buy diapers; perhaps cereal should have come first, but we are on to General Mills, symbol GIS. You all know General Mills' products.

General Mills, GIS Fundamentals

General Mills earns $2.53 per share per year and pays out $1.12.  If you own GIS by April 7, 2011, you will receive the quarterly dividend of $.28 per share on May 2, 2011. Debt to equity might appear a touch high at 1.17 but for these types of companies D/E ratios can run a bit above 1.  The dividend yield might seem a touch low at 3.06% but it grows every year at greater than 10%.  Does any other income investment you currently own increase your income by greater than 10%?

Stock Price up on demand for defensive investments.

GIS is a bit boring and one could argue that it is not cheap at $36.50 per share and they might be right.  Many have moved into defensive investments; these are investments that are safe when the world is in turmoil.    This is why a defensive stock like GIS has done quite well as measured by stock price.  You see, the market climbs a wall of worry. 

Defensive investments are just fine as long as they continue to increase our income.  I can ignore price fluctuations, but I must be sure that my quarterly checks arrive and are greater than they were a few years ago.   These are the reasons I selected GIS as this week's dividend machine.

Very Truly Yours,

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