General Electric's (NYSE:GE) stock has been trending lower in recent weeks. Nonetheless, the stock just recently bounced off major support. I see this as an excellent buying opportunity. The company is focused on the future with several new initiatives that may revolutionize various industries. In the following article, I will make my case as to why General Electric will remain a great vehicle for long-term dividend investors.
General Electric is focused on the future
In my past few articles on General Electric, I have detailed several areas where I see the potential for future growth. In the process of performing further due diligence on the name, I have discovered another gem I feel may become a big winner for the company in the near future. The company appears to have made a major breakthrough regarding LED and LCD display screens for all products. In the next section, I will detail this most intriguing catalyst.
General Electric's game changing display technology
General Electric could be on the verge of a major breakthrough regarding a new LED technology that could vastly improve the color and crispness of LED and LCD displays for everything from smartphones and tablets to TV sets, according to a recent report published by the company. If this new technology is adopted as the new standard for display screens, this could be a multi-billion dollar windfall for the company in my opinion. Buried in deep behind all the headlines regarding the company's spinoff of its financial unit was a report put out of a recent breakthrough regarding LED smartphone display technology. With all the brouhaha regarding the company recently, this news seemed to fall on deaf ears. The information regarding the new innovation was derived from this report.
What was the discovery?
General Electric Materials scientist Anant Setlur while working with a team of researchers at General Electric Lighting in Europe discovered and patented a way to produce a better red light. The improved red light makes images appear much more vivid to the human eye. According to the report:
"A large part of how we see colors boils down to the spectrum of light emitted by the source. (Although light appears white, we can see its colored components corresponding to the particular wavelengths during a rainbow.) Of these colors, the red has been the most elusive to produce. Deep red makes other colors like green and yellow more vivid. But to the human eye, it appears dim since it moves quickly to the invisible, infrared part of the spectrum." Setlur states, "For a long time, we had to choose between brightness and appearance. The result was a compromise that yielded displays and screens with a broad red profile with enough brightness, but also washed out yellows, greens and oranges."
The question is how did they solve the issue? It all boils down to a very ingenious discovery, the use of potassium fluorosilicate powder. The use of this material makes the colors pop to the human eye.
Potassium fluorosilicate powder makes colors pop
According to the report, Setlur and his colleagues at GE Lighting discovered this by adding manganese to the Potassium fluorosilicate powder and a beautiful narrow red line was emitted.
Setlur states in the report:
"The new LED technology could "vastly improve" the color and crispness of LED and LCD displays for everything from smartphones and tablets to TV sets. We were able to make LEDs emit the color red in a narrow band that makes everything look sharper and cleaner than the current state-of-art technology. It really makes the pictures pop."
This yellowish potassium flourosilicate powder manufactured in General Electric labs was key to making a better red light. So what is the next step?
According to the report, General Electric has licensed the technology to several Japanese companies. The companies are manufacturing and packaging LEDs containing the PFS phosphor material for use as LED backlights in a wide range of LCD display products. Several display companies have recently launched tablets, smartphones and large screen TV's containing these LED devices supplied by the two licensees. Setlur states: "It took us a few years to get there but soon everyone will be able to see the light."
General Electric is fundamentally sound today
The recent selloff in General Electric's stock should be viewed as a major buying opportunity. The key fundamental metrics for General Electric are trending higher on a long-term basis. General Electric has the lowest forward P/E ratios of the five largest conglomerates at 13.91. The company has met or exceeded earnings for the previous seven quarters as well.
The turnaround is at an inflection point
General Electric is focused on streamlining operations, divesting itself of unprofitable business units, and spinning off its financial unit. The inflection point for the stock has arrived. Yet, all the positives from recent events and discoveries have not been priced in. Nonetheless, there are always downside risks to weigh.
What could go wrong?
Quantitative Easing is about to be stopped
Emerging markets, which have been one of the biggest beneficiaries of quantitative easing, were hit particularly hard last year when talk of "tapering" first started to panic investors. Countries with higher current account deficits saw vicious sell-offs as a result. General Electric has made significant investments in these areas.
The current geopolitical turmoil in Eastern Europe and the Middle East presents multinational corporations with two new major risks. The Ukraine situation appears to be unraveling as we speak. Without the safety net of QE, geopolitical events may begin to weigh on the markets much more than before.
Conflict in the Middle East appears to have accelerated significantly in recent days. It seems as though all-out war could start at any time. This would not be good for anyone. Just today the Obama administration stated all options are on the table in regards to the turmoil in Iraq.
General Electric is focused on the future. This is my primary reason for staying bullish on the company. I see the company's investment in the future as good news for long-term dividend and income investors. General Electric has a solid long-term growth story and pays a hefty dividend of 3.41% and currently offers the opportunity for significant capital appreciation along the way. These facts coupled with the Fed's announcement that rates will remain at ultra-low levels for at least the foreseeable future make the stock a better investment for income investors than bonds or CDs.
I say forget about the short-term noise. The current selloff in the stock offers dividend investors a better entry point and current shareholders a chance to lock in additional shares at a higher yield. Nevertheless, I suggest always layer into your positions over time to reduce risk. The market does appear to be rolling over, yet no one really knows what the future may hold. Take your time and be patient. The risk appears worth the reward in my book, General Electric is a buy at this level.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.