General Electric Company
) has increased its quarterly dividend to 17 cents a share from 15
cents a share, reflecting a 13.3% increase. This is the fourth
dividend increase since September 2010, depicting the company's
confidence in its business and its ability to generate strong cash
flow, going forward.
The increased quarterly dividend will be payable on January 25,
2012, to shareholders of record as of December 27, 2011.
GE has always been a blue-chip stock which was particularly
attractive for its steady stream of dividends. However, during the
third quarter of 2009, the severe financial crisis compelled the
company to cut its dividend by 68% to 10 cents a share from 31
cents a share.
This was the first time since the company's inception in 1938
that it slashed its dividend. Therefore, this hike in dividend was
very much required to regain investor confidence.
During the third quarter of 2011 (the last reported quarter) the
company had cash and cash equivalents worth $91 billion, reflecting
a 16% increase year over year. However, net cash flow from
operating activities year to date declined about 8% compared to the
same period in 2010. The decline was due to higher vendor payments,
which were up by approximately $1 billion during the first nine
months of 2011.
GE also announced that it expects earnings to grow by
double-digits next year, which further strengthens our view that
the stock is well worth holding on to. The company believes that
despite the continuing volatile economic environment and headwinds
in Europe, it is confident about its performance in fiscal
For fiscal 2012, the company expects overall revenue growth of
5% with an organic growth of 5% to 10%. The surge in revenue is
expected to be driven by the company's industrial business due to
the strong international demand for deploying renewable energy and
of course its new age jet engines.
The company also sees good growth potential in the Energy
sector, as GE Energy supplies the most competent and dependable
wind turbine fleet in the world, with average utilization
reliability of 98.5%. The growing demand for electricity and modern
power grids in developing economies is expected to benefit the
company. To date, the company has invested heavily to broaden its
energy portfolio and further aspires to add smaller bolt-on
acquisitions in the $1 billion to $3 billion range.
Its European operations are of course expected to be a drag on
its performance moving forward. The company plans to spend about
$300 million to $400 million on restructuring its operations in
We maintain a long term Neutral rating on
. The company currently holds a Zacks #3 Rank of #3 which indicates
a short term (1-3 months) Hold rating.
GENL ELECTRIC (
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