General Mills' Reduced Debt Burden Strengthens Dividend Profile

While not immune to inflationary headwinds, General Mills has proven resilient in navigating higher costs with steady price hikes that have kept earnings growing steadily.

The packaged food giant behind billion-dollar brands such as Cheerios and Yoplait has used this stable cash flow to continue reducing debt, which has fallen by almost 20% over the past few years.

Leverage is projected to sit near its lowest level in a decade after spiking in 2018 to fund a large acquisition of pet food company Blue Buffalo. General Mills' improved balance sheet provides more flexibility and should help the firm defend its BBB credit rating.

The company's 50% payout ratio also hovers near its lowest level in over a decade. This provides a foundation for continued dividend growth, with a mid-single-digit raise likely to be announced this summer.

Thanks to this improved financial footing, resilient earnings, and healthy dividend coverage, we are raising General Mills' Dividend Safety Score from Safe to Very Safe.

General Mills is well-positioned to continue its streak of paying uninterrupted dividends for almost 125 years.

That said, ever-changing customer preferences, private-label competition, and healthier food trends will require General Mills to continue investing in marketing and R&D to sustain growth.

While the firm looks poised for these challenges, especially as the largest provider of natural and organic packaged foods in America, we will keep an eye on the company and provide updates as needed.