Hormel Foods vs General Mills: One Dividend Rests on Solid Cash, the Other on Fumes
Hormel (HRL) and General Mills (GIS) both paid dividends exceeding net income, but only Hormel leaves almost nothing after $311M capex and $633M in dividends.
General Mills' $85M net loss stemmed from $2.8B in non-cash charges, while $2.2B in operating cash flow fully funded its $1.3B dividend.
A payout ratio above 100% only signals real danger when free cash flow falls short, and net income alone is not enough to guide dividend investors.
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Hormel Foods ( NYSE:HRL ) and General Mills ( NYSE:GIS ) are both long-tenured packaged-food dividend payers, and in each company's most recently completed fiscal year, dividends paid to shareholders exceeded reported net income. That shared headline looks alarming on a screener, but it means something very different at each company.
For fiscal 2025, ended October 31, 2025, Hormel generated $845.3 million of operating cash flow, spent $310.9 million on capex, and paid $633.2 million in dividends against net income of $478.2 million. After capex and dividends, almost nothing remains. The fiscal fourth quarter posted a net loss of $56.2 million. In the quarter ended July 31, 2026, dividends of $161 million far exceeded the quarter's $59.5 million net income. The latest raise moved the quarterly payout from $0.29 to $0.2925, a token bump defending a 60-year streak rather than sharing growth. Shares trade near $20.13, down 17.6% over the past year.
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General Mills reported a fiscal 2026 loss that looks worse in headline terms. For the year ended May 31, 2026, net income was −$85.3 million, but operating cash flow was $2.166 billion against capex of $539.9 million and dividends of $1.315 billion. The payout was comfortably funded out of cash. The loss, concentrated in the fiscal fourth quarter (net loss of −$2.007 billion), reflected $2.8 billion in non-cash charges, including $1.75 billion of goodwill and intangible impairments largely tied to the North America Pet segment and a $1.032 billion non-cash valuation loss on the planned Brazil divestiture. Non-cash means no dollars left the building. The 127th consecutive year of uninterrupted payments continues, with shares recently at $35.70.
Reported net income includes impairments and valuation losses that never touch the checking account. Cash funds the dividend from operating cash flow after capex, and coverage is what matters. A payout ratio above 100% is a prompt to open the cash flow statement.
For Hormel, watch whether operating cash flow recovers enough to clear capex plus the dividend with room to spare. For General Mills, monitor whether strong cash generation holds and whether the fourth-quarter loss proves to be a one-off tied to non-cash marks rather than a trend.
Hormel has a cash-level problem. General Mills' loss was an accounting event; operating cash comfortably funded the payout. Hormel's earnings dropped, its cushion narrowed to almost nothing, and the raise shrank to a fraction of a cent. That is where improvement is needed before confidence returns. (A shrinking cushion behind a token raise is one of the seven warning signs we cataloged in a free dividend trap guide.)
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