The Curious Investor

The Safest Dow Stocks: How and Where to Look

Thanks Artful Dodger. I appreciate the compliment.


On Jan 28 10:34 AM ArtfulDodger wrote:

> Curious Investor:
>
> This statement I agree with for the first time in years:
>
> "Never in the last ten years do I think we’ve had the opportunity
> to buy the security of U.S. large caps with an opportunity for both
> capital appreciation and equity income returns."
>
> Good all around analysis. Thank you very much. Keep it up, please.

The Safest Dow Stocks: How and Where to Look

I'm not relying on the AAA rating as a reason for why GE will be able to keep its dividend. In fact, a credit rating has very little to do with whether or not the Company can pay its dividend. I believe that current investor worries regard around the tradeoff between dividend or AAA rating. If the situation were already so dire as the fact that GE cannot pay its dividend outright, it would have lost its triple A rating already. Currently, a good case could be made that even with a significant contraction (15-25%) in cash flow in 2009, GE will still have free cash to pay its dividend, but little else thus decreasing it's ability to add to its capital base and making it a more significant CREDIT RISK. But, given that the Company's non-finance businesses actually run without debt and the fact that the stock currently values GECC for free, GE doesn't necessarily need a AAA rating for access to large amounts of cheap debt to support its valuation.

On Jan 27 04:46 PM notsosmart wrote:

> AAA rating doesnt mean much anymore as recent congressional hearings
> showed.some of the listd co's will have to cut the dividend as this
> mess is far from over.sad to say.

The Safest Dow Stocks: How and Where to Look

Thanks Ed. I appreciate the comment. Truth be told, I am still trying to figure out just what all the hubub on GE is about. I realize there's a lot of worry over GE Capital but it seems to me that it's held up better than most other lenders providing positive earnings this year and likely next (though the reported $5 billion may be optimistic).Free cash flow remains very strong, though the Company still has to fund 35-ish% of its 2009 debt obligations. I think the dividend can stand and don't necessarily believe that the triple-A credit rating is necessary particularly at the current valuation which basically assumes the closure of GE Capital (determined via valuing the business segments via comparable multiples).

As mentioned, I'm long GE so I may be biased.
On Jan 27 08:49 AM ED K wrote:

> With so much negativity in most of the articles I have read recently,
> it's refreshing to see a positive spin.
>
> Your picks appear to be well thought out and have upside in a economic
> recovery.
>
> The two I have an issue with are INTEL and GE.Intel because of their
> continuing vendetta against AMD and GE because of their recent stats.

>
>
> Your article and opinions are appreciated.
>