My approach to dividend stock investing is based on monthly closing prices. Because of that, stock alerts will typically be posted on the last trading day of the month.
Closed at $53.26 with a dividend yield of 3.7% which is 20% above the median yield for the past 10 years. This was the lowest monthly close in the last 2 years and was 2% below the 5 year moving average. The close was a 26% correction from the highest monthly close in the last 5 years.
Since 2004, General Mills has raised its dividend every year. Dividend growth for the latest 7 year period is 11%. The smallest growth rate for the last 5 periods is 10%. In addition, dividend growth for the past 3 years has exceeded stock price growth for those 3 years. If dividend growth were to maintain the low growth rate of 10%, the effective dividend yield of this investment in 7 years would be 7.2%. Current dividend is $1.93 and reported earnings per share is $2.79 for a dividend payout ratio of 69%, which is in the upper end of the range but acceptable.
General Mills has not been below the 60 month moving average since May 2009. The previous date before that was August 2000. So, General Mills moving below the moving average is a significant event. Since January 2000, the lowest General Mills has moved below the moving average is 8%.
General Mills has been under downward pressure since March 2017. Recently the company reported $0.71 quarterly earnings that missed estimates by .05¢. To Wall Street, a quarterly miss is a mortal sin. For long term dividend stock investors, their “sin” is our opportunity.
So, due to its “on sale” status by being below the moving average; having a dividend yield of 3.7% that is 20% above the median; a substantial correction from the 5 year high close; and recent dividend growth exceeding price growth, the August close for General Mills represents an attractive investment point for long-term investors and those looking to reinvest dividends.
ACTION: Buy for dividend reinvesting