General Electric to Restore Its Dividend Tradition

Jan.26.10 | About: General Electric (GE)

General Electric (NYSE: GE), the Dow component and formerly the biggest dividend payer in dollar terms, said last week restoring its dividend is a top priority for the industrial conglomerate. GE cut its quarterly payout last year for the first time since 1938, but CEO Jeff Immelt said last week GE may see the ability to grow its dividend in-line with earnings by 2011.

The company anticipates having $25 billion in cash to deploy by the end of this year. CFO Keith Sherin mentioned on the company's fourth-quarter earnings conference call that GE is placing a higher priority on restoring its dividend than on mergers and acquisitions or share buybacks. GE cut its quarterly dividend to 10 cents a share from 31 cents in February of 2009 in an effort to conserve cash.

GE's dividend cut followed a $15 billion dilutive share offering in the fall of 2008. GE's fourth-quarter results beat analyst estimates, and it said that international orders in several of its businesses are starting to pick up and the company is starting to see an increase in its order backlogs in several of its divisions. Investors should note that while the company did say the dividend is a top priority, it did not rule out acquisitions or share repurchases and that raising dividend rests on improved profitability. Given GE's sensitivity to the broader economy, we'll likely need to see the economy improve in earnest before GE's dividend regains its lost luster.

The last time GE raised its dividend was during the fourth quarter of 2007.

Author's Disclosure: no positions