Piper Sandler downgrades General Mills, warns dividend may be cut

what happened

Piper Sandler analyst Michael Lavery lowered General Mills to Neutral from Overweight and trimmed his price target to $35 from $41. He argues the company may struggle to keep paying its current dividend because of cash-flow pressure. Over the past twelve months the shares of the cereal and packaged-food maker have fallen about 28%, and on Thursday they were down 1% at $33.87.

The quarterly dividend is 61 cents a share, a yield of roughly 7.2%. Lavery noted that payouts absorb about 80% of projected adjusted earnings, against a historical average near 50%. He called that pace unsustainable and warned of a cut of roughly 35% in fiscal 2028, with a broader range of 30% to 50% to pay down debt and fund growth.

Debt is more than four times EBITDA, well above management's target of three times. Sales remain sluggish, and Lavery estimates that the costs of the cost-savings program could consume nearly 90% of the roughly $3 billion in savings planned through fiscal 2030. General Mills also plans to reorganize into three reporting segments. Barron's said the company did not respond to its request for comment.

why it matters

For investors, the key question is how sustainable the dividend is when sales are weak and debt is high. A cut would change the appeal of a stock many owners bought mainly for its high yield.

market impact

General Mills shares: the downgrade and risk of a dividend cut weigh on the stock

• ▼General Mills shares pressure down — the downgrade and risk of a dividend cut reduce investor appetite

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