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Ideas for Income Investors. High Dividend Stocks, Mutual Funds etc.
General Electric and Its New Path of Dividend Growth
Posted by: Muhammad Bazil (IP Logged)
Date: July 9, 2012 09:21AM
General Electric (GE) is one of the oldest and largest corporations of our time. If you are looking for a company that is the closest comparison to General Electric, Siemens AG (SI) is that company. Like Siemens, GE is an organization involved with managing a number of subsidiaries that deal in diversified industries, such as appliances, energy, aviation, healthcare, jet engines, lighting, rail, software, water, business and consumer financing and many more. Also, GE is a multinational company with its operations spread worldwide, and its yearly income runs to about $140 billion. However, General Electric is significantly exposed to the prevailing economic crisis in the European countries because the company derives about 46 per cent of its yearly revenues from the euro zone.
Notwithstanding the significant exposure of GE to the euro zone debt crisis, the company is reported to have paid a dividend to its shareholders each quarter for more than a hundred years, and that includes the period of the present economic crisis. In fact, presently General Electric is rated among the top three for dividend yield on the scale of DOW 30 stocks because the company has significantly increased its quarterly dividend 4 times to attain $0.17 per share payout since 2009, when its dividend dropped to $0.10 per share in quarterly payout.
In addition, GE is a company taking pride in working with the best people, and using the best technologies, in its bid to find the finest solutions to the local needs of clients in all areas of its business concerns. Last June, GE was rated top among the stocks in the middle of the pack for price performance, ahead of Tyco International Limited (TYC), Koninklijke Philips Electronics (PHG) and Textron Incorporated (TXT). Ironically, Siemens was second to last among the stocks rated bottom of the pack for price performance during the same period.
In comparison with Siemens, some analysts have expressed the opinion that there could be a decline in the shares of General Electric during the second half of the year, simply because Siemens is also significantly exposed to the economic risks in the euro zone, and have recently announced that meeting with its previous financial estimates may be tough. The stock of Siemens fell by about 3 percent shortly after the comments were made by Joe Kaeser, the CEO of Siemens.
However, Siemens has been recording decent gains lately due to gains made in its diversified industrial units, particularly its renewable energy sector. Therefore, the fear that GE may decline in price may be unfounded even if, like Siemens, it announced its apprehension about meeting estimated financials. And if GE declines in price, it won’t be for too long! Why? General Electric is also making appreciable gains from its energy and capital subsidiaries among others just like Siemens.
Evaluation and Outlook
The financial fortune of GE has been on the upward swing since the board of one of its subsidiaries, GE Capital, announced its plan to pay about $4.5 billion special dividend to GE this year, which will translate to about 30 percent of the earnings of GE Capital in 2012. Subsequently, GE recently announced plans to pay out about 45 percent of its net profit to shareholders as dividend, besides its plan to accelerate the buyback of its common stock with effect from the second quarter of 2012 but subject to the state of the market. Also, GE Capital has been granted the Feds' approval to pay a quarterly dividend of $475 million to GE in the second quarter of this year. Some analysts have projected a dividend yield of 4.82 percent per share once shareholders get the projected GE total payout per share for 2012.
Overall, General Electric is poised for long-term growth from many of its sectors, particularly GE Energy, where its fossil fuel energy alternatives are speculated to grow its financials in 2012 and onward. Also, it is widely reported that GE Energy offers the most reliable and 99% efficient turbine fleet in the world, and its order growth is said to have increased by about 15% in the last quarter. If there is any concern at all about GE, it is about its large exposure to potential cases of political and economic disruptions in many international territories where it has significant presence. Hold.
Stocks Discussed: GE, SI, TYC, PHG, TXT,