I recently wrote this article as to why I felt that General Electric (NYSE:GE) was the "perfect stock" to own. In the article, I discussed how much cash GE would be receiving in 2013, as well as in 2014.
What becomes even more interesting is the amount of cash that the much maligned financial division has returned to the company coffers. In 2012, over $6.4 billion came directly from GE Capital. Analysts believe that at least that much will be returned in 2013.
In 2014, the completion of the sale of NBC Universal to Comcast (NASDAQ:CMCSA) will occur. That transaction could net GE somewhere in the vicinity of $15-$20 billion in cash. All of these funds, on top of cash received from operations, could exceed $50 billion in additional cash to its already impressive cash stockpile of $125 billion.
Any company that has almost $200 billion in cash reserves can basically do whatever it wants to do. Especially when the actual business is doing well. The big question is; what will GE actually DO with all of that cash?
In breaking news, announced by CNBC, and reported in this article, Comcast has decided to buy all remaining "shares" of NBC Universal, a GE component that was sold last year. The original deal allowed Comcast to purchase the remaining shares in increments in 2014. While at first glance this deal looks great for Comcast (which indeed it is), it is also an early payment of cash for GE, one year or more, ahead of schedule.
Comcast will pay General Electric (GE) $16.7 billion, an acceleration of GE's previously planned "divestiture" of the NBC properties. Comcast will also purchase the Rockefeller Center facilities in Manhattan used by the network for $1.4 billion, it said.
GE shares are also rising in late trading, currently up 72 cents, or 3%, at $23.30.
What this means for GE is that within this year, 2013, the company will add more than $20 billion in cash to its coffers.
Not only will this money be able to be used to advance other core operations, but it is my opinion that the additional cash will also be used to create more shareholder value.
Remember this graphic?
Please note the focal points of how GE intends to utilize the cash it has. Shareholders could benefit directly in two key ways:
- A potentially large dividend increase this year
- Outstanding share buyback programs that could boost the stock price
After hours trading shows GE up by 3%, and I will go out on a limb here and say we have not seen the best of it yet.
The Bottom Line
While this early payment does not give GE more money, it certainly gives the company "NOW" money, and obviously, the deal is now completed without any issues.
When a deal can be consummated sooner than later, it is ALWAYS a good deal for the seller -- in this case, GE. I believe shareholders will begin to see an accelerated increase in shareholder value.
Disclosure: I am long GE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.