This post is part of our Big Company, Small Town series, featuring large companies and the small towns in which they are headquartered.

There are probably very few people growing up in North America that have not had Kellogg's (NYSE: K) cereal at some time. I know people that have breakfast cereal for lunch or diner as well. It is the number one U.S. breakfast cereal maker, ahead of General Mills (NYSE: GIS). Among its well-known brands are Frosted Flakes and Rice Krispies.

The company, founded by Keith (W.K.) Kellogg and brother, Dr. John Harvey Kellogg, began with only 44 employees in 1906. Today it employs more than 30,000 people, manufactures in 18 countries, and sells products in more than 180 countries.

Kellogg is a big company in a small town but it is not alone. Battle Creek, Michigan, known as the "Cereal City," is the world headquarters of Kellogg Company and also the home of Post Cereals, which was part of General Foods Corporation and is now part of Kraft Foods (NYSE: KFT). When Kellogg started, there were 42 other cereal companies in Battle Creek.

Looking at the history, the village of Battle Creek began as a market and mill center for prairie farmers. The introduction of rail lines supported farming and the distribution of farm products, and the cereal companies clustered there in the same way that Detroit became the home of the auto industry or the movie business developed with its focal point in Los Angeles.

During the Great Depression, Kellogg altered its production schedule from three to four shifts to keep putting paychecks in people's hands, built a 10-acre park around their plant, and started the W.K. Kellogg Foundation, establishing a clear pattern of investing in the people and supporting their town. There is even a W.K. Kellogg Airport.

Kellogg has been trading between $46.25 and $56.89 over the past 52 weeks. I do not know what to make of its key ratios, which indicate some positives along with some puzzles. Somehow Kellogg has managed to generate a ROE of almost 48% -- that's amazing. Part of the reason is that it seems to have a substantial amount of debt on its books, so it must be using some leverage to achieve that.

A recent press release, Kellogg Company Reports Progress on Its Global Health and Nutrition Initiatives, suggests the company is not sitting idle but trying to focus on growth (and cost cutting) while its source material, all sorts of grains, keep rising in price.

The price-to-sales (TTM) seems fair, but I am put off by the price-to-book of almost 9. At 19, its P/E is higher than average, but it also pays a higher than average dividend yield of 2.38%.

Among the types of consumer goods that look like safe bets in a soft economy I would think Kellogg would be a relatively inert one, but I do not know that I would favor it over an index fund unless I was getting a deep discount.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I do not own shares of any stock mentioned.

Be sure to check out more Big Company, Small Town posts.

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General Mills (NYSE: GIS), arch competitor of fellow cereal seller Kellogg (NYSE: K), posted some good news for shareholders on Monday. In an otherwise gloomy day that saw the Dow remain below the 12,000 level and inflationary pressures still exerting a hold over the market, General Mills proved that dividends are at least one island of safety in a sea of trouble.

The company indicated that it will now pay an annual dividend of $1.72 per share. Previously, the annual dividend was set at $1.57 per share. This is a nice example of double-digit appreciation of approximately 10%. Based on Monday's closing price, General Mills' stock now yields a hearty 2.7%.

As a long-term idea, General Mills is certainly one of the best. As I observed with Kellogg, you can put this one on perpetual dollar-cost-averaging. However, with the stock in 52-week-high territory, and with prices for commodities, especially corn, still exerting a negative effect on businesses, I'd be a bit cautious about entering just now. Is it possible one might get General Mills closer to a 3% yield? I can't predict the short-term future, but my gut says that a pullback is inevitable. Even with cool dividend increases, stocks can return to the low end of a 52-week range at any point. Just look at Coca-Cola (NYSE: KO) and the recent pressure its stock has been under. And Coke is a dividend stalwart. Nevertheless, I am bullish on General Mills' future. Just watch out for commodity trends, and perhaps remain patient for better prices on the shares.

Disclosure: I own Coke; positions can change at any time.

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Talk about a tough time in the markets. Between the financial crisis and oil prices rising on an almost daily basis, with the Fed damned if it raises rates and damned if it doesn't, the floods in the Midwest are now threatening to make a trip to the supermarket much more expensive. Yes, break out the coupons and pray for sales, because, according to The Wall Street Journal [subscription], food prices are destined for one direction: higher. That's because a lot of farmland has been damaged, throwing the supply-demand dynamic into chaos.

What does this mean for investors? Look for potential pressure on the stocks of companies such as Coca-Cola (NYSE: KO), PepsiCo (NYSE: PEP), Kraft (NYSE: KFT), Kellogg (NYSE: K), General Mills (NYSE: GIS), and Hershey (NYSE: HSY). I happen to own Coke, and I've heard the news reports talking about how higher corn prices will affect Coke and Pepsi because they use corn syrup as an ingredient for their sodas. It's also been pointed out by others that PepsiCo owns Frito-Lay, and since that company manufacturers salty snacks such as Doritos and Tostitos (I love them both), corn prices will also have an impact on that division.

If you're a trader, be wary. We might be in for a rough ride this summer with not only the stocks I've mentioned here, but in a general sense. Since I own Coke, I've been acutely aware of the pullback experienced in that stock as the external pressures surround it. As I write this, the stock is trading at $54.27. The shares were over $65 during their wonderful stay at the 52-week-high suite. So, yes, buyers with short-term mentalities must be wary. However, long-term investors should look upon any pullbacks as potential opportunities for some of these food-selling companies. If you don't intend to trade, then adding to a Coke or Pepsi position might make sense.

Disclosure: I own Coke; positions can change at any time.

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MOST NOTEWORTHY:

• Oppenheimer upgraded Omnicare (NYSE: OCR) to Outperform from Perform citing their analysis that indicates the Rx market is stronger than expected in the LTC channel, which is largely overlooked by investors due to the legacy focus on beds. The firm expects solid Q2 results will increase confidence in the company's ability to achieve mid-point or better EPS guidance.
  
• Deutsche upgraded Coca-Cola (NYSE: KO) to Buy from Hold based on favorable currency impact, international growth, and valuation.
  
• OptionXpress (NASDAQ: OXPS) was raised at Merriman to Neutral from Sell as they see little downside to risk estimates, following several rounds of cuts, and valuation.

• Fresh Del Monte (NYSE: FDP) was upgraded to Outperform from Market Perform at Wachovia.
  
• JP Morgan upgraded Kellogg (NYSE: K) to Overweight from Neutral.
  
• Delta Petroleum (NASDAQ: DPTR) and St. Mary Land & Exploration (NYSE: SM) were upgraded at Merrill to Buy from Underperform.

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MOST NOTEWORTHY:

• Merrill downgraded AMR Corp (NYSE:AMR), Delta Air Lines (NYSE:DAL), Continental Airlines (NYSE:CAL), US Airways (NYSE:LCC) and UAL Corp (NASDAQ:UAUA) to Neutral from Buy citing earnings risk this year from higher energy costs.
  
• Oppenheimer downgraded shares of Chelsea Therapeutics (NASDAQ:CHTP) to Perform from Outperform after their survey suggested physicians believe currently available generic treatments are adequate in neurogenic orthostatic hypotension, which could impact the company's lead drug Droxidopa.
  
• Clearwire (NASDAQ:CLWR) was cut to Sell from Hold at Citigroup on valuation, as they estimate fair value at $13.

• Goldman downgraded Kellogg (NYSE:K) to Neutral from Buy and Hershey Foods (NYSE:HSY) to Sell from Neutral.
  
• Piper lowered Orbitz Worldwide (NYSE:OWW) to Neutral from Buy.

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Here are some highlights from this past week's earnings coverage from BloggingStocks:

• Archer Daniels Midland Co. (NYSE: ADM) Q3 profits soared, beating analysts' expectations.
• Buffalo Wild Wings Inc. (NASDAQ: BWLD) strong Q1 results met analysts' expectations.
• Burger King Holdings Inc. (NYSE: BKC) reported solid Q3 results that beat Wall Street estimates.
• Chesapeake Energy Corp. (NYSE: CHK) beat expectations for the first quarter, sending shares up.
• Colgate-Palmolive Co. (NYSE: CL) posted better-than-expected Q1 results on the weak dollar.
• Corning Inc. (NYSE: GLW) beat earnings expectations and raised its guidance.
• Corn Products International (NYSE: CPO) posted record sales for the ninth consecutive quarter.
• Duke Energy Corp. (NYSE: DUK) Q1 profits met expectations but revenues beat them.
• ExxonMobil Corp. (NYSE: XOM) missed Q1 expectations due to narrower margins.
• Garmin Ltd. (NYSE: GRMN) reported lower-than-expected earnings due to slowed demand.
• General Motors Corp. (NYSE: GM) posted a smaller-than-expected loss for the first quarter.
• Herbalife Ltd. (NASDAQ: HLF) posted Q1 results and announced the resignation of the president and COO.
• Kellogg Co. (NYSE: K) beat Q1 expectations and announced a 10% dividend increase.
• Kraft Foods Inc. (NYSE: KFT) Q1 profits declined but beat analysts' expectations.
• Procter & Gamble Co. (NYSE: PG) reported better-than-expected Q1 results and raised its 2008 outlook.

• Starbucks Corp. (NASDAQ: SBUX) posted weak Q2 earnings in line with Wall Street expectations.
• Time Warner Cable Inc. (NYSE: TWC) beat Q1 expectations and reaffirmed its guidance.
• Time Warner Inc. (NYSE: TWX) posted solid Q1 results and announced a spin-off of TWC.
• Under Armour Inc. (NYSE: UA) beat Q1 expectations but lowered its full-year outlook.
• Valero Energy Corp. (NYSE: VLO) blew past Q1 EPS expectations despite despite profits plunging 77%.

Also, Jim Cramer lauds Procter & Gamble for its success in these tough times and Colgate-Palmolive for bouncing back after taking a hit. And Time Warner investors may have been looking for more than they got in the quarterly report.

Upcoming results to watch for include Anadarko Petroleum (NYSE: APC), Cisco Systems (NASDAQ: CSCO), Fannie Mae (NYSE: FNM), Molson Coors (NYSE: TAP), Walt Disney Company (NYSE: DIS), and American International Group (NYSE: AIG).

Visit AOL Money & Finance for more earnings coverage.

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Cereal maker Kellogg (NYSE: K) issued its Q1 earnings today, and while it may not have been the most exciting event on Earth, it did beat expectations, according to Briefing.com.

The strong dollar benefited the top line, as net sales increased 10% (stripping out the effect of the strong dollar yields a top-line growth rate closer to 5%). Operating profit advanced 9%. Unfortunately, not much was happening on the bottom line -- earnings per diluted share only gained a penny, coming in at $0.81 (there was a better tax situation in last year's similar quarter, however). Not much took place in the area of cash flow either -- free cash flow declined to $181 million; last year at this time, the breakfast guru reported $289 million in free cash.

Still, Kellogg's management seems pretty confident in the company's future prospects as it saw fit to bestow a 10% dividend increase on shareholders. And going back to the expectations game, earnings came in $0.05 more than expected -- that's excellent. Kellogg, like General Mills (NYSE: GIS) and Kraft (NYSE: KFT), is a great idea for long-term dollar-cost-averaging and dividend-reinvesting (love those hyphenates!). Just don't expect tech-like growth, and do expect bumps along the way, especially with commodity prices acting as they have been.

Disclosure: I own none of the companies mentioned here; positions can change at any time.

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Kraft Foods, Inc. (NYSE: KFT) is in a bit of a pickle. As the following article makes clear, the company knows it has to raise prices. There's just no choice in the matter. Commodity input costs are on the rise, and something has to give. But the problem is, consumers not only have to pay more for Kraft foodstuffs, they have to ante up more of the green stuff for everything else too -- fuel for the car, heating oil for the home, you know the drill.

If you're a Kraft shareholder, should this concern you? What about if you own other consumer-oriented stocks based on the supermarket shelves that are feeling the inflationary pinch, companies such as General Mills, Inc. (NYSE: GIS) -- which reported earnings today -- or Kellogg Company (NYSE: K), or maybe even beverage businesses like The Coca-Cola Company (NYSE: KO) or PepsiCo, Inc. (NYSE: PEP)? Well, it should, of course. Inflation is no fun, and with the price of oil hitting new highs recently, a trend that seems very much intact, consumers will be strapped. In fact, Kraft is now trying to make up for lower volumes by raising the cost of its goods; this isn't ideal, perhaps, but Rick Searer, who is the president of Kraft North America, brings up an almost humorous point -- "consumers have to eat." I have yet to meet one that doesn't, come to think of it!

But I think the consumer companies are relatively sophisticated with their data-analysis protocols and are, perhaps, a bit more nimble in terms of deducing what shoppers want to buy for purposes of stocking their pantries. At least, I would hope they are -- we've been hearing about better data-mining techniques for years. Kraft obviously will promote a wait-and-see attitude in terms of the consumer and her reaction to the recession, but I don't think shareholders should be overly worried at this point. A lot of these defensive names have international exposure and stand to benefit from the falling dollar, for one thing. For another, we all have to eat! And since the defensive names generally have dividend yields, they tend to be safer bets during a recession; don't think they can't fall, though, because they can. One just hopes they don't fall as much as, say, your typical financial entity or a broad market index.

Disclosure: I own shares of Coca-Cola; positions can change at any time.

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Everyone loves ketchup (well, then again, I'm sure there are a few out there who don't). But should everyone love Heinz's (NYSE: HNZ) latest earnings missive?

I say the earnings were respectable, if not utterly spectacular, in the third quarter. The top line moved up a robust 14% to $2.6 billion in sales; operating income increased 8%. The bottom line, however, was, eh, okay -- $0.68 per diluted share for this Q3 versus $0.66 per diluted share for last year's Q3. A two-penny increase isn't a reason to party, I suppose. Then again, Heinz isn't one of those companies that inspire you to throw a party upon an earnings release. Like Hershey (NYSE: HSY), Campbell Soup (NYSE: CPB), General Mills (NYSE: GIS), Kellogg (NYSE: K), and Kraft (NYSE: KFT), it's a consumer foodstuffs name backed by a portfolio of well-known brands that people gravitate toward every day in supermarkets across the globe.

Here's the thing about Heinz, however: it sports a yield of approximately 3.3%, and it is in the middle of a tight 52-week range. That is definitely an attractive situation for the stock. Heinz is being perceived as a safe, recession-proof play. I'm not sure anything is truly recession-proof, but I do think the yield is impressive, and I think that such a stock may continue to hold steady, and even outperform, in this environment.

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I'm not a fan of soup; never had the stuff in my life. But I notice that Wall Street is liking Campbell Soup's (NYSE: CPB) stock today; at the time of this writing, the shares are up a little over 6%. Guess there's money to be made in that soup stuff, no matter what I may think.

For the second quarter, Campbell saw a 7% rise in net sales. Earnings from continuing operations were $0.67 per diluted share for the quarter compared to $0.65 per diluted share for the year-ago period. Gee, that doesn't sound like such hot growth. But as some articles have observed, Campbell's stock has been sold off in recent months, so this is sort of a buy-on-the-news scenario. Plus, total soup sales increased 4% in Q2, and the baking/snacking segment increased its top line by 8% -- those iconic Goldfish crackers will not be stopped, let me tell you. And you know what else is doing well? Those V8 V-Fusion beverages. I've been drinking a ton of that stuff lately; those drinks really are superb. Gross margin was down, though. I don't like that, but I do enjoy the fact that operational cash flow increased for the first half of the year: that metric came in at $442 million...in the previous comparable period, Campbell booked $328 million. Campbell recently decided to dump its Godiva brand.

I didn't find this earnings report so exciting, but Campbell Soup is like Kraft (NYSE: KFT), Kellogg (NYSE: K), General Mills (NYSE: GIS), and Hershey (NYSE: HSY) -- it has a valuable portfolio of foodstuffs that people buy every day, and it pays a dividend that should go up over time. It's not my favorite dividend-reinvesting name right now, but it'll be around for the long term. And even though I am not helping out investors by shunning soup, I do have to reiterate my love for those V8 Fusion drinks -- believe me, I'm aiding the company significantly on that front.

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• Moody's Downgrades FGIC
• Buffett Plan Beats a Bailout

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MOST NOTEWORTHY:

• Jefferies upgraded shares of ICF International (NASDAQ: ICFI) to Buy from Hold on valuation to reflect the company's accelerating core business momentum and upped Road Home funding.
  
• Citigroup raised its rating on General Mills (NYSE: GIS) and Kellogg (NYSE: K) to Buy from Hold on valuation, as they believe food consumption stocks are recession proof.
  
• Bear Stearns upgraded shares of Caterpillar (NYSE: CAT) to Outperform from Peer Perform as they believe the company will benefit from the interest rate cuts.

• Merck (NYSE: MRK) was raised to Buy from Neutral at UBS.
  
• El Paso (NYSE: EP) was upgraded to Overweight from Equal Weight at Morgan Stanley.
  
• Lehman raised Kimberly Clark (NYSE: KMB) to Overweight from Equal Weight.

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Merck (NYSE: MRK) has been upped to "buy" from "neutral" at UBS according to MarketWatch.

Kellogg (NYSE: K) and General Mills (NYSE: GIS) were upped to "buy" at Citicorp according to MarketWatch.

UAL (NASDAQ: UAUA) was upgraded to "buy" from "hold" at Soleil with a target price of $45, according to Briefing.com.

Bear Stearns upgraded Caterpillar (NYSE: CAT) to "outperform" from "peer perform," reports Briefing.com.

Douglas A. McIntyre is an editor at 247wallst.com.

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