Why I Couldn't Ignore GE

I was starting to look at venerable blue chip stocks trading at historic lows that had yields practically equivalent to their P/E ratios and I couldn't ignore General Electric (GE). While GE has virtually transformed itself from a manufacturing industrial into a Financial company over the past several years, it's much more diversified than some of the conventional banks and brokerages that are hemorrhaging cash. At Thursday's share price, it was yielding over 8% on a day when management just reaffirmed the strength of the dividend.

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So, I bought in Thursday with 200 shares at $14.7 and within hours, was rewarded with a 15% return at the end of the trading day to close at $16.9 with an 8% yield locked in to boot.

Pfizer's (PFE) the only other company of this size with an 8% yield, but if I had to pick, GE seems less likely to cut given Pfizer's impending pipeline gap.

What other blue chips are out there with obscenely high yields that you're eyeing up?

Disclosure: The author owns GE.

Comments

[Old Rick:]

Richard Kinder's KMR @ 9.3%, Diageo (DEO) 5.8%. KMR may not be a classic "Blue Chip" but it is among the biggest and best of the pipeline outfits.

2008 Nov 14 10:44 AM

[kurt walter:]

GE Capital begging for taxpayer bailout money. Not a good sign for GE. How come Buffett gets GE preferred at 10% and investors weren't given the same opportunity? Instead, they want taxpayer money. All of these companies need to dilute shareholders with common and preferred shares offered to investors, who will take the risk/reward. Going to the taxpayer is not right.

2008 Nov 14 02:22 PM

[drone:]

This is a worn out old nag that Immelt is riding. He's tried to prop it up with lies and deceptions including his appearance on Cramer back in September, his promise not to touch the dividend and his purchase of more stock. I wish I'd sold my GE stock the day after Immelt appeared on Cramer.

2008 Nov 14 09:52 PM

[distinguish...:]

I think this transformation has been a great disservice to the corp, the nation, and the many families that have trusted in GE/Hotpoint applicances.
I am beginning to think O'Reiley is correct, i.e. that Immelt is ruining the company.
Bye, the Distinguished Fellow.

2008 Nov 15 12:49 AM

[User 298782:]

My mom age 92 went to assisted living with a comfortable 3 years worth of money (GE STOCK) last May 08 so that she could stay until she is 95 years---now she has barely a years worth. I had to cash 350 shares to pay her bills two weeks ago at a depressed price ---its breaking my heart AND has me worried. I will need to cash another 350 shares in January.This is just one story in the naked city.

2008 Nov 15 10:49 AM

[Village Idiot:]

Conventional wisdom says that your 92-year-old mother should have cashed out her stocks decades ago. Stocks can (and do, as history has taught us) go down as well as up, and if you can't afford to hold out for at least a five-year horizon, you should not be invested in the markets.

As a considerably younger investor, I look at the current time as the opportunity of a lifetime to establish a sound investment portfolio at great prices. In 30 years, I am confident that it will matter not one bit whether I bought at $15, $17, or even $25. I am confident that this blip will pass, that GE will continue to generate good profits with all its businesses, and that I will retire with a substantial nest egg thanks to my decision to invest today.

Disclosure: Long in GE

2008 Nov 16 08:00 AM

[PeakOiler:]

There's a lot of toxic waste inside the finance arm of GE that won't be revealed until it explodes. Who in their right mind would buy an 'investment' without knowing the extent of the toxicity? It's no different than the banks they are still festering.

2008 Nov 16 07:19 PM