NEW YORK (TheStreet) -- General Mills (GIS) , known for its Cheerios cereal, Yoplait yogurt and various ready-to-eat foods, will report first-quarter fiscal 2016 earnings results Tuesday before the opening bell. The company's strong dividend and record of divestments make it a buy.

For the quarter that ended in August, the company is expected to earn 69 cents a share on revenue of $4.25 billion, translating to 13% year-over-year earnings growth. Revenue is projected to be flat. For the full year, ending in May 2016, earnings are projected to be up 4% to $2.97 a share, while revenue of $17.42 billion is expected to down about 1%.

With full-year 2017 earnings projected to be $3.17 a share, up some 7% above 2016, this drops the forward price-to-earnings ratio to around 18. Against a forward P/E of 17 for the S&P 500 (SPX) index, this may not seem like great value.

But that hasn't stopped General Mills stock from putting up impressive results. And there's nothing to suggests these shares can't deliver in the quarters and years ahead.

The consumer staples group, down some 2% on the year, has struggled amid periods of weak sales, tepid profit margins and the negative impact of the strong U.S. dollar.

Yet General Mills stock -- up 7% on the year to date and 9% over the past six months -- has outperformed its competitors.

The 150-year-old Minneapolis-based company, which has taken on new marketing initiatives, has begun to re-invent itself by divesting of poorly performing businesses.

Earlier this month, General Mills announced plans to sell its Green Giant and Le Sueur business to B&G Foods (BGS) for $765 million. The proceeds will be used of reduce the company's debt, making it more attractive. And under a licensing agreement with B&G Foods, General Mills still retain the Green Giant business in Europe, where it generates significant revenue.

What's more, the company, which last year picked off organic and natural food specialist Annie's (BNNY) , is ramping up its high-growth, high-margin organic foods category to better compete with the likes of Kellogg (K) and Kraft Heinz (KHC) . General Mills plans to also unveil 50 new products, which it expects to drive higher sales in the quarters and years ahead.

Want another reason to buy the stock? General Mills pay a solid 44-cent quarterly dividend for a yields of about 3.12% annually, topping the 2.00% average yield paid out by stocks in the S&P 500 index.

The element of safety offered by the dividend makes holding General Mills stock for the long term a smart move, especially since the company has raised its dividend almost 60% in the past four years -- about 15% annually.

 

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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