Rabu, 01 Oktober 2025

How Safe Is This Beloved Company's Dividend?

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General Mills: How Safe Is This Beloved Company's Dividend?

Marc Lichtenfeld, Chief Income Strategist, The Oxford Club

Marc Lichtenfeld

General Mills (NYSE: GIS) started as a flour mill in 1866. Since then, it has created some of the most iconic American food brands, including Cheerios, Betty Crocker, and Pillsbury. It has also expanded into the lucrative pet food market.

However, the stock has not performed well over the past two years. The decline in the share price - plus annual raises in the dividend - means the stock now yields nearly 5%, which is catching the attention of income investors.

Is the dividend as reliable as that box of Cheerios in the pantry, or will it spoil like a pint of raspberries the minute you bring them home from the store?

The company already completed its fiscal 2025 in May. The results weren't great. Revenue and profits were down, and free cash flow fell 9%. Over the past three years, free cash flow has plummeted from $2.75 billion to $2.29 billion. In fiscal 2026, free cash flow is forecast to slip again to $2.16 billion.

Chart: General Mills (NYSE: GIS)
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Anytime cash flow is falling, the Safety Net model will penalize the company and lower its dividend safety grade. It's not a good sign.

General Mills currently pays a $0.61 per share quarterly dividend, which comes out to a 4.9% yield. Last year, the company paid out $1.3 billion in dividends, which was 58% of its free cash flow. That payout ratio is perfectly acceptable. I like payout ratios to be 75% or less of free cash flow. That gives me comfort that the company can continue to pay its dividend even if cash flow falls.

In fiscal 2026, General Mills' payout ratio is expected to inch up to 62%, which is still fine.

So we have a concerning trend in free cash flow... but a safe and reasonable payout ratio.

What does that mean for the company's dividend safety rating?

Click Here for My Grade...
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