The last few months have not been kind to General Electric (GE). Concerns about slowing worldwide growth and the ongoing European debt crisis have conspired to knock 25% off its stock price. However, GE’s solid and growing dividend, low valuation and technical support levels should put a floor under its stock price at current levels. It is also well positioned to be a long-term winner in the global economy.
“General Electric Company operates as a technology, service, and finance company worldwide”. (Business Description from Yahoo Finance)
7 reasons GE is a good buy in $15 - $16 range
(click chart to enlarge)
- GE has had good technical support in the $15 - $16 range in the last year (See Chart)
- General Electric provides a generous yield of 3.8% and it has raised its dividend 50% in the past two years. GE seems committed to use its increasing cash flow to get it dividend back to its pre-crisis level over time.
- Long term, GE’s aviation and healthcare divisions are well positioned to take advantage of the faster growth in the developing world.
- GE has met or beat earnings estimates for twelve straight quarters and is selling for just 11.5 times this year’s expected EPS.
- It has a five-year projected PEG of under .8 which is 45% under its five-year average.
- General Electric has an AA+ rated balance sheet and is projected to grow its earnings at a 14% annual clip over the next three years.
- GE is selling way under analysts’ price targets. S&P has a price target on GE of $24 a share, Credit Suisse is at $22. The median analysts’ price target on General Electric is $20.
Disclosure: I am long GE.