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General Mills: An Isolated Winner 'Among Virus Carnage'

May 07, 2020 9:49 PM ETGeneral Mills, Inc. (GIS)17 Comments
Richard Berger profile picture
Richard Berger


  • GIS is a safe haven for income investors in the virus recession bear market.
  • Over 120 years of uninterrupted dividends couple with conservative payout ratios and cash flows easily covering dividends and capex to make this a core portfolio target.
  • A 12.98% yield rate, along with 12.98% downside market protection, can carry you through the next 2+ months of virus economy, providing immediate cash income.
  • Looking for a helping hand in the market? Members of Engineered Income Investing get exclusive ideas and guidance to navigate any climate. Get started today »

An Engineered Income Investing Top Idea.

A feast draws your attention, sating your appetite and fueling a warmth to your very core. Fuel for your core portfolio is what we are focusing on during this virus recession. General Mills (NYSE:GIS) is a Dividend Zombie that belongs in the core of any income portfolio.

Company: General Mills

Current Price: $58.97

Dividend: $1.96 (3.32%) Ex-Div ~7/8/20

Fair Value:

FV: YDP $54.90

FV: P/E $60.20

FV: P/S $47.20

Brief Discussion

General Mills earns a top place in the core of income portfolios for its quality as a Dividend Zombie with 120 years of uninterrupted and uncut dividend distributions, a recession-resistant consumer defensive packaged foods segment member, global brand powerhouse, and best of breed. All of these qualities make it qualify as a SWAN (sleep well at night) core target.

The price history chart confirms this thesis, with shares having immediately bounced back from the initial momentum-driven virus economy plunge to a new high above the pre-bear level already. The packaged food - consumer defensive industry segment is stable through economic cycles. This is exactly the property an income investor seeks.

Dividend Review

Dividends are judged by their reliable history, safety, and yield.

Reliable history demonstrates a company's commitment to the dividend. Track records of reliable dividends for 25, 50, and even the rare 100 years of unbroken distributions do not come by accident. Only planning, with proven execution and financial depth to back it up, and a dedication as a key core company value will provide results that create such historical track records. General Mills is a giant among these, with over 120 years of uninterrupted dividends.

A steady and sustainable trend of dividends is the first metric of dividend safety. General Mills' cash payout ratio below 50%, with a steady long-term trend, marks it as a

Stop Chasing Yield. Engineer high yield from high quality safe dividend stocks while reducing downside market risk. Help to navigate the virus economy bear market.

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This article was written by

Richard Berger profile picture
Mr. Berger is the creator and developer of the YDP screening tool, a chart system and its analysis for screening and monitoring dividend income equity investments. The recipient of Seeking Alpha's Outstanding Performance Award, he also has been Seeking Alpha's #3 ranked Author for Income Investing Strategy & #4 for Utilities. 20 years of sitting in the board room gives me unique insights into Oil & Gas investments and corporate deal making in general. Additionally, he offers a Subscription Service  for Value & Income investors, boosting income while reducing market risk using covered option writing on a dividend income equity portfolio. Residing in Brazil gives me a local's inside view on the pulse of its economy, politics, investment climate and breaking news. A view of my front yard is available here.A former Chief Operating Officer, Director, Vice President and General Manger of Oil and Gas for Southern Pacific's Oil and Gas Operations, Business owner, geologist, and cribbage player, I've been an investor for over 48 years (started young at 13) and learned my lessons the way that makes them stick, by hard knocks and both big and little mistakes. Hopefully I can share some of those lessons with others.I am an American expatriate that decided to retire at age 57 in 2009 and now live in Brazil. As an early retiree I invest for income and manage portfolio risk by screening for strong and reliable historic data along with favorable fundamental and technical current trends.I spend 6 months/year living at home in Brazil and 6 months/year traveling the world. I have structured my financial positions so that I live virtually tax free with much of my income exempt from US tax since I live ex patriot and a lot of my US derived income over the annual ex-patriate exemptions is held in my tax free ROTH and tax deferred IRA/SIMPLE plans. This enables my tax savings to pay for my 6 months of annual traveling :) . My investing is for income and appreciation with a balance of low to moderate short term risk and low long term risk. To accomplish this I use quality dividend payors with a long track record of steady or increasing dividends along with slowly appreciating equity prices. I target a 8 to 15 % yield and almost exclusively require a minimum history of 5 years of steady/increasing dividends and no decreases in dividend ever or at least past 10 years. I diversify through sector, country and currency unit the stocks are traded in, and security type (equity, royalty trust, REIT, etf, and ADRs). I use covered call writing to enhance my portfolio yield with no added risk. In fact, it lowers the risk substantially. Once I identify a stock I want to own and an entry price for it, I write cash covered puts at or below that entry price (with a minimum of 1%/month time premium. Thus i obtain at least a 12% annualized yield before compounding just from the option premium. Likewise, I use the sale of cash covered puts to generate income and and generally get an entry point at 5 to 10% below my acceptable entry level price if/when the put stock does get presented. Thus my strategy provides a 12% pre compound yield on cash and entry into stock purchases at a 5 to 10% discount from "retail". Because I only select stocks that I am willing to hold long term for their reliable dividend yields, I am not concerned much with market volatility or short/midterm risk. Indeed, market volatility is my friend since it increases the premiums paid on the options I sell. I also selectively sell covered calls on positions I hold long so as to add to my yield that way while not taking on any additional risk.This strategy has kept me happily living off my portfolio income and traveling 1/2 the year while my portfolio has been slowly increasing in value even after my harvesting income for living expenses. As of December 2020, I am no longer writing for Seeking Alpha. If you would like to contact me with questions about my work or subscription service, please leave me a message on this site or email me at boater805@gmail.com

Analyst’s Disclosure: I am/we are long GIS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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