Since the infamous dividend cut GE has gotten back on track with multiple quarterly dividend increases. The dividend has increased nearly 100% to $0.19, an impressive accomplishment, but still significantly below the original $0.31. So can GE win back former income investors who took such a big hit with the dividend cut? Does the blemish on a once exemplary dividend record cause current income investors to pause before initiating a position in GE?
Based on our Dividend Safety scoring system, lets take a look at how safe GE’s current dividend is.
Beyond the dividend cut, the only potential red flag based on our analysis is GE’s high debt to total capital. The company currently has a low free cash flow payout ratio, over one year's worth of the annual dividend in cash on hand, and a spectacular bond rating. The one question investors should ask is, did GE learn from their past blunder and have they taken the right precautions to prevent it from happening again.
It's clear that GE values its credit rating over its dividend consistency and will sacrifice its dividend payment in order to preserve its high rating should the need arise again. Based on an improving economy and strengthened company outlook it's hard to see GE being put in that position anytime in the near future. An upcoming dividend increase is expected to be announced soon as well. With the current financials and recent increases, anything less than a 10% increase will likely be viewed as disappointing.
The 4% Portfolio Retirement Service has made no recommendations on GE.
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