Nike, Walt Disney, and General Mills: Are They Worthy Investments?

Look under the hood of these iconic companies to see if they belong in your portfolio.

Apr 20, 2014 at 12:00PM

Large global companies such as sports apparel and footwear company  Nike (NYSE:NKE), entertainment conglomerate Walt Disney (NYSE:DIS), and food company  General Mills (NYSE:GIS) can provide wealth expanding opportunities in the form of capital gains and dividend increases over the long-term. However, this requires investors to ride out ups and downs through nasty events such as recessions, bubble bursts, and massive layoffs.  It always to pay to do your research to see if these companies stand on solid financial footing to weather any storm. Just because a brand is popular doesn't necessarily mean its a buy. Here's why. 

The swoosh tells all


Source: Motley Fool Flickr by Chris Mali

Nike and its iconic swoosh represents one of the most highly recognized brands and symbols in the world. Also, Nike resides in the No. 24 spot in terms of the world's most valuable brands according to  Sports is big business. For example, the 2014 Superbowl was viewed by 111.5 million viewers according to This means that the Nike brand enjoys a lot of eyeballs when its symbol gets viewed at an event such as this.

Looking under the proverbial hood at Nike's fundamentals reveals that its revenue and net income grew 9% and 10% respectively so far in 2014. However, the timing of customer payments, inventory increases, increases in accrued expenses, and increases in capital expenditures resulted in a 20% decrease in free cash flow so far this year.  Nike sits on an excellent balance sheet with $5 billion in cash and short-term investments comprising 45% of stockholder's equity. Nike's long-term debt only makes up 11% of its stockholder's equity.  Nike paid out 58% of its free cash flow to shareholders so far in 2014 paying $0.96 per share per year and yielding 1.4%. 

The fantasy portfolio


Source: Motley Fool Flickr by Elvis Fool

Walt Disney holds a large stable of sci-fi and fantasy characters under the Lucasfilm, Marvel , and Pixar umbrellas in addition to its strong cast of traditional characters such as Mickey Mouse and Daffy Duck. Its characters such as Iron Man  and Thor enjoy immense popularity at the box office. In the most recent quarter, Walt Disney grew its revenue and net income 9% and 33% respectively.

 However, increased capital expenditures served as a primary reason for a free cash flow decline of 27% versus the same time last year.  Walt Disney held $4.4 billion in cash during the most recent quarter representing 9% of stockholder's equity. Long-term debt to equity clocked in at a low 25% of stockholder's equity.  Last year Walt Disney paid out 19% of its free cash flow in dividends.  Currently the company pays its shareholders $0.86 per share per year and yields 1.1%.

Cereal yields income


Source: Motley Fool Flickr by Ben Popkin

General Mills sells cereal, yogurt, food, and snacks under labels such as Cocoa Puffs, Cookie Crisp, Toaster Strudel, and Nature Valley.  Looking at General Mills demonstrates the importance of researching the fundamentals of a company no matter how popular. General Mills grew its revenue 2% so far in 2014. However, its net income and free cash flow declined 5% and 24% respectively during that time.  Restructuring and exit costs and negative effects from working capital had a huge effect on General Mills' cash flow.

 The company faces market saturation on the domestic front with year to date sales remaining roughly even in the U.S. retail segment. Moreover, General Mills' convenience stores and food service segment also saw its sales decline 3% stemming from lower volume. The international arena saw an 8% increase stemming mostly from acquisitions. Its balance sheet doesn't look all that great either. General Mills sits on $847 million in cash equating to 13% of stockholder's equity. Its long-term debt to equity increased 21% from the same time last year causing its long-term debt to equity ratio to increase from 83% to 106%. General Mills paid out 55% of its free cash flow in dividends so far this year.  Currently the company pays it shareholders $1.64 per share per year and yields 3.2% annually.

What now?
Nike isn't going anywhere anytime soon. Nike commands an iconic presence in the athletic world. Also, look for growth to come from the recovering Western European markets and the emerging markets. Walt Disney commands iconic presence in the science fiction and fantasy world with its Marvel and Pixar blockbusters. The new Star Wars movie due out in 2015  will most likely prove as big a hit as Avengers and Iron Man enhancing chances for superior capital gains and dividend increases for this company. Finally, investors should shy away from General Mills until it can find better market opportunities specifically overseas or in the form on new product innovations that can provide incremental top and bottom line growth. It would help if General Mills paid down some of its debt as well.

6 stock picks poised for incredible growth
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

William Bias owns shares of Walt Disney. The Motley Fool recommends Nike and Walt Disney. The Motley Fool owns shares of Nike and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers