3,000 euros in shares of general mills (WKN: 853862) Investing: Is Now a Good Time? This raises several relevant questions. For example, if you are convinced of the US food company as a whole. Or if the market environment is stable enough. You can never really know, but in the food segment the overall risk is justifiable.
In principle, the timing of investing €3,000 in General Mills could actually be more favourable. The fundamental valuation is approaching a cheap level. It also has solid growth rates, a strong dividend and a business model that could be in demand given the defensive class. Especially in an uncertain market environment.
General Mills: Invest 3,000 euros now?
Let’s start with the fundamental valuation of General Mills. In any case, the US food company is trading at a share price of US$61.99. With an annual dividend of $2.04, that works out to a dividend yield of 3.3%. Or put another way: With a bet of 3,000 euros, we receive a gross return of 99 euros. That is not little. Especially for a defensive grocery stock that has been at least a consistent payer for more than three and a half decades.
Current results are more important. General Mills recently reported earnings per share of $0.99 on an adjusted and diluted basis. This shows that the quarterly dividend of $0.51 is very sustainable. With a P/E ratio of just under 15.7, the valuation is fairly subdued overall. From a valuation point of view, there are not many arguments against an investment.
Of course, General Mills shares may become cheaper. No doubt. But investing $3,000 to secure strong US brands like Lucky Charms, Cheerios, plenty of other cereals, and a portfolio of over 100 strong food brands isn’t bad. Especially not in these conditions.
Growth and defensive class possible
The €3,000 invested in General Mills also offers the opportunity to benefit from the defensive class of a group that has been in existence for more than 100 years. Yes, the management has even paid dividends for over 100 years, showing that there is strong potential for return. Management is currently playing the inflation card, leading to price increases and potentially strong top line growth, as well as earnings growth.
But organic growth is also possible without price increases. General Mills recently invested in the pet food segment and partially or initially in the vegan market. This means that further growth in the medium and long term is also possible.
So there are plenty of reasons to invest €3,000 in this defensive stock now. Be it the dividend, the defensive class, the overall valuation or even the medium and long-term outlook. The key is to invest with the right expectations and bet on solid and timeless returns.
The article Is Now a Good Time to Invest $3,000 in General Mills? first appeared in The Motley Fool Germany.
Vincent owns shares of General Mills. The Motley Fool does not own any of the shares mentioned.
Motley Fool Germany 2022