How COVID-19 Strengthened This 'Global Elite' Food Giant

It's been a year now since "a few weeks" of lockdowns began...

Restaurants had to close indoor seating, gyms had to close their doors completely, and even hospitals saw a drop-off in elective procedures.

Today, there's hope on the horizon as vaccines roll out, and folks can finally see the light at the end of the tunnel.

In the meantime, as regular readers know, the pandemic economy favored some businesses while crushing others.

Companies that focused on remote-working technology, video games, and even homebuilders all saw surges in demand over the past year. And their shares show it... E-signature company DocuSign (DOCU) and the iShares U.S. Home Construction Fund (ITB) have more than doubled from their 2020 lows, while Electronic Arts (EA) has also performed well.

Today, we're highlighting another company that not only survived, but thrived throughout these tough times...

General Mills (NYSE: GIS) is a $38 billion packaged-foods giant. Its products are everywhere. It boasts well-known brands like Cheerios (cereal), Yoplait (yogurt), Häagen-Dazs (ice cream), Pillsbury (dough), Nature Valley (snack bars), Betty Crocker (baking products), and Annie's (organic foods).

General Mills also recently bought popular pet food brand Blue Buffalo. The company says Blue Buffalo is the "leading brand in the fast-growing wholesome natural pet food category in the U.S." And it expects Blue Buffalo to continue to deliver "top-tier returns" for shareholders in the long term.

These brands are what make General Mills a true "Global Elite" business. Remember, Global Elite companies have dominant, widely recognized brands. That gives them a leg up over their competition.

And even better, General Mills' products are always in demand. No matter what's going on in the broader economy, people will still buy cereal, baking products, and pet food. That leads to steady sales growth for the company. But sales have especially picked up over the past year...

We last highlighted General Mills in the Stock of the Week in May 2020. At the time, demand was surging as folks stocked up on staples ahead of the COVID-19 lockdowns. General Mills said sales jumped by 45% in March and 32% in April, citing Nielsen-measured retail sales. As a result, sales spiked 21% higher for the company in the quarter ending in May.

That sent shares of General Mills soaring in the early months of the pandemic. From its March low to its August high, the stock jumped nearly 40%. For a "boring" company selling snack foods like General Mills, this just shows how in-demand products were.

And the elevated demand is still around today...

In the most recent quarter, the packaged-foods company reported third-quarter earnings per share ("EPS") of $0.82 versus the $0.84 estimate. However, revenue for the quarter was $4.52 billion, beating the expectation of $4.45 billion. That represented 8.1% growth from the same quarter last year.

For its 2021 fiscal year (which ends in May), General Mills forecast organic growth of 3.5%. The company said that this reflected the strong results through its first three quarters, as well as the tough comparable period in the fourth quarter. (Fourth-quarter revenue growth could look like General Mills saw a huge drop in sales, but only because last year's fourth quarter came in at abnormally high levels.)

Despite the tough comparable period, General Mills said that it still expects "elevated" demand for its products moving forward. That's as folks continue working from home and making home-cooked meals.

The company is using its recent strength to increase the reward for shareholders...

General Mills has paid a dividend for more than 100 consecutive years. And this dividend payout keeps growing... Over the past five years, General Mills' annual dividend has grown by 13.5%. And the company currently has a dividend yield of 3.4%, well above the 1.5% yield on the S&P 500. This should make General Mills an attractive investment for income-focused investors.

General Mills also said that it has restarted share buybacks in the fourth quarter. The company did this after reducing leverage, ensuring that its balance sheet was in a strong position. That will return even more capital to shareholders.

While consumer-staples stocks may not always provide exciting growth, people stock their pantries full of their products in good times and bad. And that has led to a surge in sales for General Mills. With the demand not easing anytime soon, General Mills is using its strength to reward shareholders.

Sometimes investing is simple.