People retiring now or in the near future have my sympathy. It’s a tough time to be retired.

#-ad_banner-#Few people have a pension anymore, and Social Security doesn’t provide anywhere near the purchasing power it used to. So, as never before, the onus for financial security in retirement is on the individual.

Clearly, retirees need all the help they can get in generating sufficient income, which is why I always keep an eye out for the best income-producing investments available. And I’ve got one that’s perfect for the equity portion of their portfolios.

One thing that makes this stock so right for retirees is its safety factor. Typically, it’s 76% less volatile than the market. So if the market corrects by 10%, this stock might only fall 2% or so.

In general, to get a sense of a stock’s safety, I like to see how it did in 2008, a terrible year in which the broader market took a nasty 37% tumble thanks to the financial crisis.

However, my ideal retirement stock was up 9.5% that year. With dividends, it posted a total return of 12.2%.

I’m referring to General Mills (NYSE: GIS), a well-known global leader in packaged foods and one of the best options available to retirees seeking solid investment income.

Its great showing in 2008 notwithstanding, GIS isn’t likely to deliver fast growth at this point in its long history. But retirees should appreciate the firm’s steady upward trends in sales, earnings and cash flows, as well as its consistently strong margins in an industry where margins can be wafer-thin. This sort of reliability is exactly what has made GIS a great income stock with uninterrupted dividends for 115 years.

Here’s a snapshot of GIS’s performance recent performance.

Some quick math shows the firm raised its dividend 15.7% a year since 2008 to the current $1.64 per share. With the stock price around $53, that’s good for a 3.1% yield. And I expect the yield to remain in that range for the foreseeable future based on past and projected growth rates.

Again, though, don’t look for the explosive (but very volatile) expansion you might get from a small- or mid-cap stock. From GIS, I’d watch for steady, sustainable revenue and earnings growth rates of more like 6% and 7%, respectively, during the next five years without a whole lot of variation from those averages.

	Flickr/jeepersmedia
	General Mills’ growth will come from factors like its dominance of the ready-to-eat cereal market, where the company is the second-largest player, with well-known brands such as Cheerios, Chex, Wheaties and Kix, among many others.

Such growth will come from things like dominance of the ready-to-eat cereal market, where GIS is the second-largest player and has many well-known brands such as Cheerios, Chex, Wheaties, Kix and others.

General Mills also owns 40% of the ready-to-serve soup market, mainly on the strength of its Progresso brand. It’s also a leader in refrigerated dough and baking items, snacks, ice cream and yogurt, boasting top brands such as Betty Crocker, Pillsbury, Haagen-Dazs and Yoplait.

Management knows the firm will have to evolve to stay profitable and protect market share from cheaper private-label competition. Later this year, for instance, it plans to launch a variety of new products reflecting consumers’ desire for a healthier diet with adequate fiber and protein.

Popular brands will be heavily leveraged to maximize the success of such products, which will include vegetable chips, gluten-free cereals, breakfast biscuits, and fruit and nut bars among other things.

Another major catalyst for GIS will be an even greater focus on international operations, which currently account for 29% of revenue and have spiked 81% since 2011 to the current $5.2 billion. The bulk of foreign sales ($3.4 billion) take place in Europe and Canada, though the portion contributed by emerging markets like Asia, Latin America and Eastern Europe could soon equal and eventually well surpass this since those are likely to be the areas of greatest opportunity.

An important part of General Mills’ international growth has been a longstanding 50-50 partnership with global food and beverage giant Nestle (OTC: NSRGY). 

The partnership, which currently contributes $1.1 billion to the top line and has expanded into 130 countries, should be a big advantage going forward because of Nestle’s expertise with local emerging markets. General Mills will be able to use Nestle’s knowledge to minimize the uncertainty of international expansion as it seeks partnerships with (or buyouts of) the best local companies.

Risks to Consider: GIS could display weakness in the near term if rising input costs prompt higher prices that would weigh on sales volumes. This could develop into a longer-term issue if input costs rapidly shoot up.

Action to Take –> Fortunately, the unprecedented double-digit input cost increases of the past few years appear to be subsiding. So I project that any weakness in GIS’s financial and stock performance will be temporary. Indeed, I’d take it as an opportunity to buy a stock every retiree should own for its reliable growth, low volatility and solid dividends.

With a bottom line that’s projected to climb about 7% a year, GIS’ earnings per share (currently $2.73) could hit $3.85 in five years. Based on forecasts for its earnings multiple to average around 18 during that time, the stock may climb 30% to $69 from the recent price of $53. Assuming GIS maintains its 54% payout ratio, its dividend would rise to $2.08 in five years, for a projected yield of 3% at that time. Thus, total returns from the stock could average more than 8% a year from now to mid-2019.

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