Thursday, July 12, 2012

General Mills GIS Dividend Machine - a contrarian play

A box of Cheerios breakfast cereal.A box of Cheerios breakfast cereal. (Photo credit: Wikipedia)

Contrarians can get yield too!


            Are you a contrarian?  I would not be surprised that an income investor like you would not really know what a contrarian is?   In stock market terms, it refers to someone who goes against the prevailing market direction. 

            Contrarians sometimes congregate around a particularly industry or sector.  Right now, everybody believes growth is dead.  The consumer is dead.  Why would you want to buy a company that sells goods to consumers?   Most consumer stocks are pretty stinky right now.   Contrarians like that kind of environment because if they are right and the consumer returns, (so far they always have) they buy these companies at a bargain.

            This week’s dividend machine sells stuff like cereal to consumers.  The stock is stuck in the middle of its 52 week range but General Mills (GIS) has paid a dividend every year since 1898 and raised their investors’ income every year for the last eight years.  They know how to get through the slow times.   See how easy it is to be a contrarian.

            You can go broke being a contrarian if you select your stock without discipline.  When a contrarian play also qualifies as a dividend machine, you have some comfort in your decision. GIS meets all four criteria for dividend machine status.  Trading at about $38.86, GIS’s quarterly dividend of $.33 yields 3.39%.  As noted above, they have increased the dividend every year for eight years.  GIS carries minimal debt; their D/E ratio is .01; only one percent.  Finally, GIS earned $2.35 and paid out $1.245 in dividends.  

            The table below presents the dividend machine fundamentals for GIS.  Consider GIS as an income investment for that portion of portfolio.

General Mills (GIS) Fundamentals

Price when profiled
Last 4 Qtrs Earnings
Last 4 Qtrs Dividend
Current Dividend Yld
No. of Years increased
Debt/Equity ratio

Very Truly Yours,

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