General Mills (GIS): Dividend Durability After the Yogurt Sale and Pet-Food Pivot

Yogurt divestiture, dividend yield and the immediate balance-sheet question#

General Mills closed out fiscal reporting with a headline that matters to income investors: the company trades at $49.25 per share with a market capitalization of $26.71B and a trailing dividend yield of 4.89% (dividend per share TTM $2.41). Those figures frame every subsequent calculation about sustainability and capital allocation. The corporate-level pivot that dominated investor discussion in mid‑2025 was the sale of the U.S. yogurt business to Lactalis, announced and closed around the end of June 2025, a transaction management said would materially change leverage and free up proceeds for buybacks and debt reduction GuruFocus News.

The timing of that sale is the analytic fulcrum. The company’s published FY2025 financials (period ended 2025‑05‑25) show FY2025 net debt of $14.93B and EBITDA of $3.92B, which implies a pro forma net‑debt/EBITDA of roughly 3.81x using the reported fiscal numbers (14.93 ÷ 3.92 = 3.81x). That ratio is materially different from some market commentary that reported a post‑sale net‑debt/EBITDA near ~2.5x because the sale closed after the fiscal balance-sheet snapshot. In short: the officially reported FY2025 numbers do not yet reflect the cash impact of the June 30 sale; any lower leverage cited in analyst notes is a post‑period, pro forma figure tied to the timing of proceeds and subsequent debt paydown GuruFocus News.

That timing nuance drives the single clearest near‑term investor question: is the dividend supported by operating cash flow on a pre‑ or post‑transaction basis? Using the FY2025 cash‑flow statement as reported, General Mills generated $2.29B of free cash flow in the period and paid $1.34B in dividends—implying dividend coverage by free cash flow of approximately 58.5% (1.34 ÷ 2.29). That metric supports the headline dividend but leaves limited room for large, rapid dividend increases absent improved underlying cash generation or further balance‑sheet moves GuruFocus - General Mills Free Cash Flow and Seeking Alpha - Dividend Safety.

Financial performance — revenue, margins and cash flow trends#

General Mills’ top line in FY2025 was $19.49B, down -1.87% year‑over‑year from FY2024’s $19.86B (calculated from the company’s FY income statements). The revenue decline is small but persistent, part of a multi‑year pattern where legacy grocery categories have softened while pet and certain premium-snack segments expand. On the margin line, gross profit of $6.73B produced a gross margin of 34.52% in FY2025, a modest compression from FY2024’s 34.91% but well above the mid‑30s level that has characterized recent years. Operating income for FY2025 came in at $3.30B, producing an operating margin of 16.93%, and fiscal net income was $2.28B, or 11.72% net margin—figures consistent with a large, stable consumer‑staples operator but not indicative of accelerating scale economics.

Free cash flow is the clearest cash metric for dividend analysis. The FY2025 cash‑flow statement reports $2.29B in free cash flow, down from $2.53B in FY2024, a decline of roughly -9.3% year‑over‑year based on those fiscal totals. At the same time, depreciation and amortization of $539MM provided a non‑cash cushion to operating cash but does not substitute for underlying revenue or margin strength. The modest fall in free cash flow—together with ongoing capital expenditure (FY2025 capex around $625.3MM) and roughly $1.20B of share repurchases in the year—help explain why management has prioritized the yogurt sale to restore cash flexibility and accelerate deleveraging if and when proceeds are applied to debt reduction GuruFocus - Free Cash Flow.

A table summarizing income‑statement trends across the last four fiscal years shows the subtle but important movements in revenue, margins and net income that shape dividend coverage and strategic choices.

(All figures from company fiscal statements, filing dates referenced in FY2025 filings.)

Balance sheet and capital allocation — reconciling headline claims and reported figures#

At first glance the balance sheet as reported in the FY2025 snapshot does not show the pro forma benefit of the June 30 yogurt sale. On a reported basis at fiscal year‑end FY2025, General Mills carried total debt of $15.30B and cash and cash equivalents of $363.9MM, yielding a reported net debt of $14.93B. Using the FY2025 EBITDA of $3.92B, that equates to a net‑debt/EBITDA ratio of ~3.81x (14.93 ÷ 3.92). Market commentary that cites a much lower leverage ratio after the Yogurt divestiture is referencing post‑period cash inflows and subsequent debt paydown rather than the fiscal snapshot GuruFocus News.

Management disclosed that the yogurt sale generated proceeds north of $2 billion and that the capital plan for those proceeds included deleveraging and share repurchases. Those steps would, on a pro forma basis, reduce net debt materially — which is why analysts who show net‑debt/EBITDA nearer ~2.5x are implicitly or explicitly modeling the transaction and immediate uses of proceeds. The critical analytic discipline is to keep reported‑basis metrics and pro‑forma, transaction‑adjusted metrics separate so investors can see both the starting point and the post‑deal capital structure change GuruFocus News.

Capital allocation in FY2025 shows an active distribution posture: $1.34B of dividends paid and $1.20B of stock repurchases. That combined cash return of roughly $2.54B accounted for a large share of fiscal free cash flow and investing/financing activity, which helps explain why management used a divestiture to reweight the balance sheet. Investors should view the yogurt sale as both a strategic portfolio pruning and a near‑term liquidity event intended to reinforce the company’s target leverage and shareholder‑return program Seeking Alpha - Dividend Safety.

A balance‑sheet and cash‑flow summary table below highlights the elements most relevant to dividend coverage and leverage analysis.

(Reported figures reflect fiscal year closing statements; pro‑forma adjustments for subsequent transactions are discussed in the text.)

Strategic pivot: pet food growth, portfolio reshaping and margin implications#

General Mills’ strategic tilt toward pet food—primarily through Blue Buffalo and the introduction of premium brands such as Edgard & Cooper in the U.S.—is the most important medium‑term revenue and margin lever. Company commentary and sector reporting point to North America Pet net sales of approximately $2.5B in FY2025 with Q4 pet growth accelerating to +12% in the quarter and dry vs wet/treats showing differing growth profiles. The attractiveness of pet is simple: higher gross margins and secular market growth in premium pet categories provide a pathway to improved corporate profitability if scale and mix trends persist Ainvest - General Mills Boosts Pet Food Portfolio.

Yet trading away the U.S. yogurt business cuts both revenues and lower‑margin volume; the near‑term outcome is a small hit to reported revenue and earnings vs a long‑term bet on higher aggregate margin. The company signaled that the divestiture would be modestly dilutive to adjusted EPS in the first 12 months—management quantified the effect as about a ~3% EPS drag in early commentary—because the yogurt unit added revenue but carried lower margin contribution. The strategic calculus is thus explicitly about rearranging the portfolio for higher average margin and less working‑capital consumption at scale, even if that requires short‑term EPS smoothing and active capital redeployment to sustain returns.

From a margin‑story vantage point, the path to larger free cash flow and dividend optionality runs through converting pet revenue into incremental operating income. If pet gross margins and operating leverage can widen group margins by even a couple hundred basis points over a multi‑year period, the company can support both buybacks and modest dividend increases. Execution risk is non‑trivial: the company must defend Blue Buffalo’s market share, execute product innovation, and manage input‑cost inflation and media spend in pet categories while arresting declines in core grocery brands.

Earnings quality and recent surprises — what the beats reveal#

General Mills’ recent quarterly results delivered a pattern of small positive surprises: in the most recent quarter the company reported adjusted EPS of $0.74 vs an estimate of $0.709, a surprise of approximately +4.37% ((0.74–0.709) ÷ 0.709). The company has produced a series of modest beats in recent quarters (including Q3 and earlier beats), indicating either conservative street estimates or modestly better execution on margins and cost control in the short term. These beats have not, however, translated into a durable acceleration in reported revenue growth — the top line remains essentially flat to slightly down on a multi‑year basis [company filings and earnings releases].

Quality of earnings is best assessed by comparing net income to operating cash flows and by tracking one‑time items. For FY2025, operating cash flow of $2.92B exceeds reported net income of $2.28B, a typical profile for stable consumer companies where working‑capital movements and non‑cash charges (depreciation & amortization of $539MM) affect the translation from accounting earnings to cash. There were meaningful investing and acquisition movements in FY2025, including roughly $1.16B of acquisitions net and $625.3MM of capex, which represent purposeful allocation to scale and growth. Those transactional items—together with the post‑period yogurt sale—mean that normalized, run‑rate free cash flow in 12–24 months will depend on management’s ability to integrate acquisitions and deploy divestiture proceeds efficiently [FY2025 cash‑flow statements].

Analyst reaction is split. Some sell‑side notes highlight the high yield and pet‑market optionality as reasons to view shares as undervalued, while others point to structural retail weakness and margin pressure in legacy categories as grounds for caution. The market’s mixed stance is reflected in differential forward PE assumptions and divergent forward EV/EBITDA multiples shown by different broker models; this dispersion underscores the key source of valuation uncertainty—execution on the strategic pivot rather than a pure accounting or cyclical mismatch [Nasdaq analysis and sector notes].

What this means for investors#

Investors seeking steady income can view General Mills’ ~4.89% yield and multi‑year history of distributions as a viable source of cash, but the judgment about sustainability and growth of that dividend rests on three linked factors: free cash flow trajectory, post‑sale leverage, and pet‑food margin conversion. On reported fiscal numbers (which predate the June 30 sale), the dividend is covered by free cash flow but with limited headroom—dividend coverage by FCF is about 58.5% for FY2025. Pro‑forma for the yogurt sale and assuming proceeds are used to pay down debt as management signaled, the company’s leverage and free‑cash‑flow cushion would improve materially and increase dividend flexibility Seeking Alpha - Dividend Safety and GuruFocus News.

For investors focused on dividend growth rather than income level, the critical read is whether pet and premium snack businesses can expand margins enough to offset legacy declines. Pet presents a credible runway—management reported accelerating pet sales and new product introductions—but converting revenue growth into sustainable margin expansion will require consistent pricing power, cost control and successful marketing investment. Failure to deliver that conversion would likely keep the dividend stable rather than growing at a meaningful clip.

Finally, the capital‑allocation tradeoffs matter. The company’s use of the yogurt‑sale proceeds—between debt paydown, buybacks and potential reinvestment—will determine whether per‑share metrics improve through leverage reduction or whether the company is merely reshuffling returns without addressing underlying organic growth. Analysts and investors should watch the company’s Q3/Q4 2026 disclosures for clear pro‑forma balance‑sheet metrics that include the sale proceeds and for updated guidance on how realized savings and reinvestment are expected to flow through to margins and free cash flow GuruFocus News.

Key takeaways#

General Mills is a large, cash‑generative consumer company undergoing a deliberate portfolio reshaping: the June 2025 U.S. yogurt divestiture materially changes pro‑forma capital structure and should, if proceeds are applied to debt reduction and selective buybacks, increase near‑term financial flexibility. On a reported fiscal basis (FY2025), key metrics are: Revenue $19.49B, FCF $2.29B, Dividends Paid $1.34B, Net Debt $14.93B, and EBITDA $3.92B, implying a reported net‑debt/EBITDA of ~3.81x. The trailing dividend yield of 4.89% is covered by reported cash flow but with modest headroom; dividend growth beyond modest annual increases will depend on successful margin conversion in pet and stabilization of legacy categories.

Investor focus should be on three measurable catalysts: (1) management’s public disclosure and application of yogurt‑sale proceeds and the resulting pro‑forma net‑debt/EBITDA; (2) sequential margin improvement in North America Pet and premium snacks; and (3) free‑cash‑flow conversion after reinvestment and any M&A. Absent visible improvement on those three fronts, the dividend appears sustainable but unlikely to be a strong growth engine.

Conclusion#

General Mills presents a mix of dependable cash generation and structural execution risk. The company’s fiscal reporting shows a solid cash‑flow base that covers the current dividend, but the transformational effects of the June 2025 yogurt divestiture are largely pro‑forma to the FY2025 statements and therefore require careful reconciliation by investors. Pet‑food growth provides a plausible route to higher margins and improved free cash flow, but execution must consistently convert revenue gains into operating leverage. For the investor community, the near term is about verifying that the promised post‑sale deleveraging actually occurs on the balance sheet and that pet margins begin to show up in operating income and free cash flow on a recurring basis.

(Selected figures drawn from General Mills’ FY2025 reported financial statements and related corporate releases; strategic details about the yogurt divestiture and pet‑food initiatives referenced from company commentary and sector reporting including GuruFocus News, GuruFocus — Free Cash Flow, Ainvest — Pet Food Portfolio, and Seeking Alpha — Dividend Safety. )