If You Like Conagra's Dividend But Not Its Business, You'll Love General Mills' Dividend and Its Business
Key Points
Conagra is a large consumer staples company with a collection of brands that aren't industry leaders.
General Mills is a large food maker that has long focused on owning the best brands.
The big draw for Conagra's (NYSE: CAG) stock today is its ultra-high 8.9% dividend yield. However, the yield is that high for a very good reason. And income investors may want to temper their enthusiasm just a little bit. Here's why General Mills (NYSE: GIS) and its 6.5% yield could be a better option if you are looking for a high-yield consumer staples stock.
The problems with Conagra
Conagra's recent business performance has been fairly weak, with organic sales down 3% in its most recent quarter. The food maker also chose to write down the value of some of its brands, which is not a sign of business strength. From a big-picture perspective, Conagra owns many second-tier brands. While the company's adjusted earnings cover its dividend, the stock's yield is high for a reason.
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General Mills isn't executing particularly well right now either, which is why its yield is a lofty 6.5%. Organic sales fell 3% in its most recent quarter, too. However, General Mills has long focused on owning industry-leading brands, a fact that was highlighted when it bought Blue Buffalo in 2018.
Quality over quantity at General Mills
At the time, Wall Street thought General Mills was overpaying for Blue Buffalo. General Mills countered that it was buying the leading healthy pet food brand and that growth would be robust. General Mills' focus on quality proved a smashing success. The company has been making additional changes to its portfolio, recently exiting the yogurt business while it continues to expand its high-end line of pet food products.
Basically, it is reshaping its portfolio to better align with consumer preferences. And it is doing so with a focus on being the industry leader in the consumer staples sectors in which it operates. Having paid dividends for more than 125 years, this is a long and successful approach. Investors are clearly worried about the business, given the current headwinds in the packaged food industry, including cost-cutting among consumers and the increasing importance of healthier food options. However, General Mills' track record suggests it will adjust and, just as important, remain an industry-leading business.
General Mills is in an investment year
What's important to highlight is that General Mills isn't ignoring the headwinds it faces. It entered fiscal 2026 with a goal of focusing on advertising, adjusting pricing, and reshaping its portfolio. Management expects the next quarter to be an inflection point, with financial results improving into the next fiscal year. That suggests that now, while investors are still deeply negative, could be a good time to buy the stock.
Reuben Gregg Brewer has positions in General Mills. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.