I trade GE around a core position in my portfolio. Today I took some profits in GE by selling some of the shares at $18.93 that I bought for $15.00 last year to book a nice profit and have cash available should GE plunge on a bad news when it announces earnings later this week on January 20th. I still like GE for the long term. This is why.
General Electric Company (GE) makes products related to the generation, transmission, distribution, control, and utilization of electricity. Through GE Capital Services, GE offers financial and other services, including consumer financing, commercial and industrial financing, real estate financing, asset management and leasing, mortgage services, consumer savings and insurance services, and reinsurance. GE’s business units also provide solutions that include efficient jet engines, turbines for power plants and windmills, bomb detection equipment and new GE Appliances for a global population that is always growing. GE will benefit greatly from growth in emerging markets as they add infrastructure and their people buy modern appliances. GE has benefited from strong demand in China, Eastern Europe, the Middle East, Brazil and other countries that are buying fleets of airplanes, building new railroads and expanding their power capacity by buying gas and wind turbines. GE also has large investments in solar energy and oil recovery.
On Dec. 9, GE’s board of directors raised the quarterly dividend 13.3% or $0.02 from $0.15 to $0.17 per outstanding share of the Company’s common stock. The Board declared that the dividend is payable January 25, 2012 to shareowners of record at the close of business on December 27, 2011. The ex-dividend date is December 22, 2011.
On Dec 13, GE said it expects sales in fiscal 2012 to grow at a rate of about 5% with profits to grow in double-digits over fiscal 2011. CEO Jeff Immelt said strong cash flow would enable GE to continue raising its dividend.”
GE stock fell over 30% last year, which means it ALREADY had a bear market. If GE’s Oct. bottom spike holds as a final low, then it may be predicting an economic bottom in the near future. Note that GE’s stock price bottomed months before ECRI called for an end to the 2008/2009 recession.
I took profits at $18.93 in the event the economy rolls over as ECRI predicts and we get another opportunity to repurchase shares near the 2011 lows. See my SeekingAlpha article ,"ECRI's Weekly Leading Index Falls: Jobs To Get Worse Under Recession-Bound U.S. Economy."
At $15, GE would have a dividend rate of 4.53% so this seems highly unlikely GE will fall to this level again but you never know. They had to cut their dividend in the 2008/2009 meltdown so this dividend is certainly not written in sacred stone.
Technically, the chart of GE below shows it is still in "bear mode" due to the circled "Death Cross Pattern."
(Click to enlarge)
With any luck, GE will not disappoint investors when it announces earnings then make a bullish "Golden Cross."
Another reason to take profits now is the fundamentals for GE shown in the table below are at "fair value" where the growth rate equals the trailing twelve month (ttm) PE ratio giving it a TTM PEG of 1.0. A good reason to still hold shares as a core position is price will need to go up 13.33% to maintain this PEG for next year based on estimates of earnings for this year (2012.)
(Click to enlarge)
Summary: GE currently at $18.97 pays a very good dividend of 3.6% and has good potential to grow both the dividend and share price once the global economy starts to grow at a good pace again. With its diverse business and large dividend, GE is like a global mutual fund that PAYS YOU the management fee.
Disclosure: I am long GE. I took profits today at $18.93 and advised my newsletter subscribers to take profits also but I still have long-term core positions in both my newsletter explore (See March 4, 2009 Buy Alert at $6.76) and personal portfolios. I have a target in my newsletter to take more profits near the 2011 highs. I will probably repurchase the shares I sold today if the price corrects but I have not decided where to set this "Automatic Buy" level to use a limit order.
