Dividend Analysis of General Electric

General Electric Company (GE) operates as a technology, media, and financial services company worldwide.

It is a dividend aristocrat as well as a major component in Dow Jones Industrials and S&P 500 indexes. Over the past 10 years, the company has delivered an average total return of 6.50% annually to its shareholders. The stock price has yet to recover from its 2000 highs, though. The company has managed to deliver an impressive 10.24% average annual increase in its EPS.

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The ROE has been in a decline over our study period, falling from a high of 24% to a low of 15% in 2006 before recovering below 20% in 2007.

Annual dividend payments have increased over the past 10 years by an average of 12.38% annually, which is slightly above the growth in EPS. A 12% growth in dividends translates into the dividend payment doubling every 6 years. If we look at historical data, going as far back as 1976, GE has actually managed to double its dividend payments every six years.

If we invested $100,000 in GE on December 31, 1997 we would have bought 4089 shares. Your first quarterly check would have been $408.90 in March 1998. If you kept reinvesting the dividends though instead of spending them, your quarterly payment would have risen to $1561.47 by December 2007 and you would be expecting to collect $1574.49 in February 2008. For a period of 10 years, your quarterly dividend has increased by 210%. If you reinvested it though, your quarterly dividend would have increased by 281.87%.

Although the payout has been over 50% for the past several years, I like the company’s low P/E ratio at 15 and the above average dividend yield of 3.60%.

Comments

[margin321]

actually 12* growth in dividend per year equals a 221% increase every 7 years - that is more than double. It also equals a 197% increase every six years, similar to GE's historical rate of rise in dividend dating back to 1976.

The simple math should be correct if one expects the analysis to be accepted.

[No Moss]

Agree. It's called the rules of 72s (72/12=6 years). A lot of big stocks have the problem of slow to no growth--look at Johnson & Johnson. They raise their divvies every year, with no apparent affect on their stock price, which is lower than it was at its peak in 2001. But the return is good, and it's safe, for both stocks.

[DividendGrowthInvestor]

You are correct. It does double every 6 years at 12% dividend growth. It's a typo.

[DeaverB]

Impressive.

[GE GAL]

Those dividends are for what this stock is worth keeping, especially if one has many shares. It's been my way to enjoy a good life. Thank God for GE. Stock price is not important, if one doesn't plan to sell. Of course, it WOULD be nice to have the stock price reflect those increased earnings over the years, also. Time may tell here. Patience.

[NormanLepoff, M.D.]

GE is a great company!

[FootballGeek]

I'm kind of happy that the true value of this great company is not reflected in the share price, because I plan to keep buying more. GE is
a global powerhouse, with a wide range of products and services that will be in demand for many years. On the cnbc web site today they said that GE has a cash reserve of 15.75 billion dollars.

[jbonefish]

GE is a bohemoth but should be trading at a higher multiple. Unfortunately, the market gets bored with it and freaked out by the sheer market cap. I worked here from 2000 to 2006 coming out of college and the stock and options stunk for those years but one thing you come to appreciate is that GE will deliver earnings growth, increase the dividend, and push 20% ROE year after year. The cash is for M&A to boost the portfolio of businesses and provide accreditive earnings when the right opportunity presents itself (which could be around the corner in this market). It's amazing that this stock doesn't correlate more to treasuries - seems like a flight to safety is also US MegaCap and what is safer than decades of earnings growth and an aggressive culture of making your numbers with integrity.

[User 161675]

GE is the ultimate representative of the S&P. Given that it is off it's high to a greater percentage than the S&P and has a higher yield, it is a better play for those willing to accept the specific company risk. However, it will probably track the OEF (S&P 100) very closely as most of the Mega Caps are still well off their 2000 highs (more so than th S&P 500). Even though I own it, as I prefer individual equities, one has to wonder if the company specif risk is worth it vs the OEF ETF with a lower 2.23% dividend yield. I agree it is a good company, but bad things happen to good companies and on a total return basis, with Welch out, how much better do you think GE will perform compared with the OEF?

[John Q.Public]

As a GE retiree, I agree the dividends are great and that they keep increasing. And to the other comment above it doesn't matter the stock price until the time you cash out but still, with double digit growth each year I fail to understand why this stock is not doing better than it does. As a retiree, there will come a time, and it could be at any time, when you need to dip into the well and then it is too late to wish the reservoir had grown more over the years. I have been diversifying since I retired since the stock price hasn't done hardly anything since 2001 and there are much better opportunities for growth in the market. Still I own a few thousand shares. Look a GE as a one stock mutual fund since it is so diversified.