Okay, this company has been in my portfolio for many years. It served me well for much of that time — holding up better during the Great Recession than most of my stocks. But during the last couple of years, it has pulled back. Buying opportunity? Or another instance of Ted chasing a bad stock down?

At today’s valuation, I say buying opportunity. General Mills, like most consumer staples companies (and the packaged food industry in general) faces headwinds. Consumer choices have made the market tougher for cereal, canned soup and yogurt sales. Jim Cramer a while back said on his show that the company’s brands were “tired.” These are real challenges, but we’ve seen old brands make comebacks before, and good companies adapt to changing consumer tastes.

Oh, by the way, General Mills currently sports a 4.6% dividend yield (and a payout ratio of a little over 50%). The trailing P/E ratio is just over 12%. The company also has a manageable debt load. And by the way, GIS and its predecessors have paid dividends without interruption for 120 years.

On the cautionary side, GIS had a 3.6% short interest in mid-October, so some investors are still betting the stock is overvalued.

MorningStar likes the company, calling it one of the analysts’ top picks amid beaten down consumer staples. The company noted that some analysts are skeptical about General Mills’ ability to boost profits through its recent acquisition of pet food company Blue Buffalo.

“We’re more optimistic about the firm’s ability to reinvigorate growth through reinvestment in its brands, and to integrate and grow Blue Buffalo by following the same playbook it did with Annie’s, which it acquired in 2014,” the MorningStar report said.

 

 

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