General Mills, Kroger Appetizing

In these lean times, investors have snapped up the companies' shares as Americans focus on food staples.
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For another Street.com Ratings story on a similar theme, check out It's Time to Play Ketchup.

There are few American brands more recognizable than

General Mills

(GIS) - Get Report

. Its staples include Cheerios, Wheaties, Pillsbury, Chex, Colombo, Betty Crocker and Green Giant. They are weathering the economic storm better than most other brands.

General Mills employs incredible diversification. Simply put, if it is edible, the company probably makes it. Some heavy-hitters, like Progresso soup and breakfast cereals, have plenty of competition from other well-known brands, such as

Campbell Soup

(CPB) - Get Report

and

Kellogg

(K) - Get Report

. However, the competition has not fared as well as General Mills has in the recession. Shares of Campbell and Kellogg are down 19.2% and 18.4% this year, respectively, while General Mills has risen 7.6%.

While all three of the stocks are rated "buy" by TheStreet.com Ratings, General Mills scores substantially higher in our quantitative rankings in regard to risk, being minimal, and reward, which is ample.

Upon review of the financials for General Mills, the knee-jerk reaction is to be alarmed by the amount of debt. With liabilities accounting for 66% of its capital structure, trouble could be brewing, given current credit conditions. It would be disastrous if the company could not refinance this debt due to frozen credit markets.

However, $3.7 billion of the $4.3 billion in long-term debt will not need to be refinanced until at least 2012. This allows plenty of time for credit markets to thaw before the company needs to seek significant financing.

What's more, the rate paid on debt is extremely low, below 4%. Due to various interest-rate hedges and a strong credit rating, General Mills has been able to finance its operations more cheaply than most other companies.

Currently, General Mills is paying out a dividend yielding 2.8% and has beat analysts' earnings estimates in three out of the past four quarters. Second-quarter revenue increased 8% over the previous year as consumers decided to forgo expensive dinners out and started to spend more on groceries.

During a downturn, pricey name-brand product sales sometimes decline as cost-effective private labels are scooped up, but General Mills CEO Ken Powell has said that, while the private-label market share has increased, it has not eaten into its sales.

Another beneficiary of the trend toward higher grocery bills will be grocery stores. Grocery giants such as

Kroger

(KR) - Get Report

may become some of the only retailers to see an uptick in sales during these tough times as they have the most indispensable products, which actually are the low-cost alternative to restaurant and take-out meals.

Kroger runs various supermarkets, such as the flagship Kroger stores and Ralphs, in addition to warehouse clubs, convenience stores, multi-department stores (Fred Meyers) and other retail outlets. The company had sales of over $70.2 billion last year and is on pace to exceed that figure this year when the fiscal year ends in February.

Kroger has beaten analysts' earnings estimates for the past four quarters and is projected to post 10.4% earnings growth in 2010. The company also has close to a billion dollars in cash sitting on its balance sheet and pays a dividend currently yielding 1.4%. Return on equity has also remained strong, at 24.4%, as the company has a low equity base and has not seen a dip in sales that is leading to dismal returns in other sectors.

TheStreet.com Rating has Kroger currently rated as a "buy," and the stock has lost only 1.5% of its value this year.

With the combination of General Mills and Kroger, investors can double-dip in one of the only areas in the retail sector that will not run completely dry in the recession. People will always need to eat and these companies provide a plethora of food products to suit any taste.