Monday, December 17, 2012

GE Boosts Dividend Again ... Announces More Share Repurchases, Too

GE is a blue chip company for sure, and I've owned its shares for many years.

It also pays a dividend yielding 3.5% per share and announced another increase in its dividend just last week.

Although the company reduced its dividend during the financial turmoil a few years ago, it didn't eliminate it. With the latest increase, the company has now raised its payout five times in the past three years. I believe that annual dividend increases will be in store for investors in GE's shares for many years to come and that dividend reductions won't occur for at least another several decades, if then.

GE Boosts Dividend, Buyback has the news:

"General Electric Co. increased its dividend and said it would buy back another $10 billion worth of shares, as Chief Executive Jeffrey Immelt seeks to reward investors and mop up stock the industrial conglomerate issued to shore itself up during the financial crisis.

The quarterly dividend was raised by 12% to 19 cents a share, which will be paid in January and should cost the company an additional $211 million a quarter. The annual yield is now about 3.5%. The buyback program, which had about $4.9 billion in remaining authorization at the end of the third quarter, was extended through 2015.

GE's dividend remains well below its level before the financial crisis. In 2009, facing investor concerns about souring investments at the company's giant lending arm, GE slashed its dividend from 31 cents to 10 cents and raised $12 billion selling shares. Both steps were painful for investors. Now GE, with a stockpile of $85.5 billion in cash, is making a priority of boosting payouts to shareholders. . . .

In the first nine months of the year, GE paid out $8.4 billion in the form of dividends and share buybacks. Mr. Immelt has said the company will pay out 45% of GE's profits as a dividend and seeks to lower the number of shares in circulation by 500 million, to 10 billion.

To right the ship and drive growth, Mr. Immelt has been working to shrink GE's finance arm and expand the industrial businesses by investing in emerging markets and new products. The company has also put the brakes on major acquisitions, instead favoring smaller deals of up to $3 billion. . . .

GE shares, which ended unchanged Friday at $21.62, have risen 21% this year. In late 2007, before the onset of the financial crisis, they traded above $42."

Summing Up

The cash dividend on GE shares now yields more than government bonds pay in interest.

The price of GE shares should also grow substantially during the next several years as the company's earnings continue to climb.

Another fact of life is that GE management will continue to be motivated to 'make up' to shareholders some of their 'lost dividends' the past few years.

For long term investors, the company's outlook looks good.

Thanks. Bob.

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