This Undervalued Stock Has Paid Dividends For Over 100 Years

Stock prices decline for a number of reasons. Typically, a sharp decline in share price happens because a company’s fundamentals are deteriorating. However, sometimes a stock decline is not entirely justified. A temporary slowdown might cause investor sentiment to erode, but the long-term potential of the company could still be intact. In these cases, a falling share price could actually represent a buying opportunity.

Food and beverage giant General Mills (GIS) has had a rough year. The stock has declined by approximately 27% so far in 2018. Some of its core brands have experienced slowing growth, as consumer preferences are shifting, which has investors worried about its future prospects. If all that weren’t bad enough, the food and beverage industry as a whole is facing higher raw materials costs due to inflation.

However, General Mills has a long history of navigating difficult times. The company still has many category-leading brands, and a huge recent acquisition gave it access to a major new growth category. In the meantime, the stock price decline has made shares cheap, with a 4.5% dividend yield that pays investors well to be patient.

Business Overview & Recent Events

General Mills traces its roots to the 1860’s and a small flour mill in Minnesota. In the 150+ years since, General Mills has grown into a massive food and beverage company, with annual sales of nearly $16 billion. The company’s core products include cereal, flour, baking products, and prepared meals. Its major brands are Cheerios, Wheaties, Gold Medal, Betty Crocker, Pillsbury, Yoplait, and Nature Valley.

This is not an easy time for General Mills. Slowing sales of some of its core brands, cereal and yogurt in particular, have weighed the company down over the past year. These challenges were evident in General Mills’ financial performance in fiscal 2018. Organic sales and adjusted earnings-per-share were both flat for the year. U.S. yogurt sales declined by 12% for the full fiscal year.