Key Takeaways
- General Mills yields 7.7% and British American Tobacco yields 6.1%, but General Mills plans to hold its dividend at the current rate while it pays down debt.
- British American Tobacco’s dividend took 78% of its free cash flow over the trailing twelve months, against 85% at General Mills.
- General Mills’ net debt is 3.7x EBITDA, above its own 3x target, against 2.9x at British American Tobacco.
- $10,000 in General Mills pays $770 a year today, against $610 in British American Tobacco.
A 7.7% yield from General Mills (GIS), after its stock fell almost 22% in September, is hard to ignore. But on Sept. 23, CFO Kofi Bruce said the company expects “to maintain the current rate per share while we prioritize deleverage.”
British American Tobacco (BTI) yields 6.1%, and on its July 30 call it promised more of its “progressive dividend.”
So which is the better high-yield dividend stock: the bigger check that’s on hold, or the smaller one with a progressive policy behind it?
| Metric | British American Tobacco (BTI) | General Mills (GIS) |
|---|---|---|
| Dividend yield | 6.1% | 7.7% |
| Annual dividend | £3.34 a share (fiscal 2025); $3.29 at today’s exchange rate | $2.44 a share |
| Dividend growth, 5 years | 2.2% a year (fiscal 2020–2025) | 3.9% a year (fiscal 2021–2026) |
| Cash dividend payout ratio (TTM) | 78% (to June 30, 2026) | 85% (to Aug. 30, 2026) |
| Net debt/EBITDA | 2.88x | 3.67x |
| Interest coverage (EBIT/interest) | 5.2x | 4.94x |
British American Tobacco’s cash cover is mending
British American Tobacco’s growth is coming from its newer products. The company says US volume and revenue for its Velo nicotine pouches are growing by triple digits. It expects 2026 EPS growth toward the middle of its 5% to 8% range. On Sept. 29, at its Capital Markets Day, it reaffirmed that guidance and its progressive dividend.
From fiscal 2019 to fiscal 2024, free cash flow of £8.33 billion to £10.3 billion a year covered dividends of £4.60 billion to £5.27 billion with room to spare. Then free cash flow fell to £5.79 billion in fiscal 2025, barely above the £5.29 billion paid out.
That made for a risky 91% cash dividend payout ratio in fiscal 2025. The ratio is back to a healthier 78% over the twelve months to June 30, 2026.
Chief Executive Tadeu Marroco said the company “will continue to reward our shareholders through strong cash returns, including our progressive dividend.” Management’s target of above 95% cash conversion for 2026 is what backs that promise.
The dividend is set in pounds, so the dollars a US holder collects move with the exchange rate. The main risk is another year like fiscal 2025, which left the dividend almost no cushion.
General Mills is hitting pause
General Mills has the bigger yield. But its business is under more pressure.
In the quarter to Aug. 30, 2026, Foodservice and International each grew 4% organically, but North America Retail fell 3% organically. For fiscal 2027, the company expects adjusted operating profit to fall 8% to 13% in constant currency, even with at least $750 million of cost savings, and adjusted EPS of $3.00 to $3.20, against $3.55 in fiscal 2026.
Free cash flow covered the dividend every year from fiscal 2017 to fiscal 2026. But it fell from $2.29 billion in fiscal 2025 to $1.63 billion in fiscal 2026, against $1.32 billion of dividends.
…which took its cash dividend payout ratio from 58% in fiscal 2025 to 81% in fiscal 2026, and to a tight 85% over the twelve months to Aug. 30, 2026.
Management says it’s “fully committed to our dividend,” and cash still covers it. But with net debt at 3.67x EBITDA (a little over 4x on the company’s own count, Bruce confirmed on the Sept. 23 call), spare cash is going to debt reduction. It doesn’t expect buybacks in the near term, and no raise is coming soon.
So which dividend wins?
I’d go with British American Tobacco. For a high-yield stock, what decides it is whether the check is safe and can still grow. British American Tobacco’s cover is improving. General Mills’ cover is thinning, and its debt sits above its own target.
General Mills’ net debt to EBITDA rose from 2.9x in fiscal 2024 to 3.7x in fiscal 2025, and stayed at 3.7x in fiscal 2026. Bruce says it will take “at least a couple of years” to get back to the 3x target.
This isn’t to say General Mills’ dividend is in danger, and the bigger check matters: $10,000 pays $770 a year today, against $610 from British American Tobacco. Even with no raise for a decade, that $770 would still top British American Tobacco’s year-10 income of about $744 at its 5-year rate.
It’s just that I’d rather own the dividend with improving cover, less debt and a business guiding to earnings growth than one with falling profit and a freeze in place.
Of course, that depends on British American Tobacco’s free cash flow holding up after fiscal 2025’s dip. Its 2026 cash conversion, against that 95% target, is the number to watch.
So what is British American Tobacco stock actually worth?
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