General Electric (GE) Stock Analysis
General Electric Dividend
General Electric has paid a dividend since 1899, but lost much of its exemplary reputation when it slashed the dividend by 67% in 2008.
GE is included in the Arbor Dividend Growth / Producers List because it has made large strides in making its future more stable and increased the dividend for 6 consecutive years.
Current Dividend: $0.96
Dividend Yield: 3.9%
Cash Dividend Payout Ratio: Negative
Market Capitalization: 212 B
Enterprise Value: 266 B
Industry: Diversified Industrials
General Electric is an industrial powerhouse being redesigned to “build, power, move, and cure the world with software-defined machines & solutions that are connected, responsive & predictive.” (GE Annual Report) The company has a long and illustrious history of achievement and high returns for investors.
However, the company’s recent past has been marred by bad capital allocation decisions, an historic dividend cut, and poor shareholder returns. The last several years the company has been shedding much of its non-core businesses, including greatly downsizing the size of GE Capital, to concentrate on its industrial roots.
General Electric’s portfolio of business operations is organized around the “GE Store” as follows: Power (22% of revenues), Aviation (21%), Healthcare (15%), Oil & Gas (10%), Energy Connections & Lighting (12%), Renewable Energy (7%), GE Capital (9%), Transportation (4%). Geographically revenues are distributed: United States (43%), Europe (17%), Asia (17%), Middle East & Africa (14%), Americas (9%).
Dividend Analyzer Checklist
(updated August 2017)
Dividend Safety Score (14/33 points)
Dividend Per Share (ttm): $0.95
Dividend Payout Ratio (ttm): 83%
Dividend Per Share (10 Year Growth): -1.0%
Cash From Operations (CFO) Per Share (ttm): -0.06
CFO Dividend Coverage (CFO / DPS): -0.1% (0/6 points)
Free Cash Flow (FCF) Per Share (ttm): $-0.86
FCF Dividend Coverage (FCF / DPS): -0.9% (0/6 points)
Net Financial Debt: $50400 M
Total Assets: $355500 M
Net Financial Debt / Total Assets: 14% (9/12 points)
Net Financial Debt to EBITDA (ttm): 1069%
Total Liabilities to Assets Ratio (Qtr.): 79%
Piotroski Score (1-9) (TTM): (5/9 points)
Profitability & Growth Score (10/33 points)
Revenue (10 Year Growth) *CAGR > 4.14%: -2.0% (0/4 points)
EPS Basic Cont. Operations (10 Year Growth) CAGR > 4.14%: -6.0% (0/4 points)
Cash From Operations (10 Year Growth) CAGR > 4.14%: -8.2% (0/6 points)
Operating Earnings Yield (ttm): 19.5% (7/7 points)
Net Income (ttm): $7714 M
Gross Profit (ttm): $61943 M
Total Assets: $355500 M
Gross Profitability Ratio = GP / Total Assets: 17% (3/12 points)
Cash Return On Invested Capital (CROIC)(tttm): -3%
Return on Invested Capital (ROIC): 3%
Return on Invested Capital (ROIC) (5 Year Median): 3%
Return on Invested Capital (ROIC) (10 Year Median): 3%
Valuation Score (4/34 points)
Free Cash Flow Yield (ttm): -3.4% (0/9 points)
EV to EBIT (ttm): 28.5 (0/9 points)
EV to EBITDA (ttm): 20.6 (0/9 points)
PE10: 22.6 (4/7 points)
Price to Sales Ratio (ttm): 1.5
Price to Book Value (ttm): 3.0
Price to Earnings Ratio (P/E) (ttm): 31.9
TOTAL POINTS – (28/100) (50 is an average score)
*Compound Annual Growth Rate (CAGR)
**A Compound Annual Growth Rate of 4.14% = a 50% gain over 10 years.
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SWOT Analysis For General Electric
A company does not thrive over 100 years without significant competitive advantages. GE has a wide economic moat because of its research & development, patents, established customer relationships, ability to do large and complex projects (because of its size and expertise), and strong brand.
GE’s industrial roots increase its exposure to cyclical businesses that will be affected by global economic volatility. It will be a long time before the earnings GE capital was producing can be replaced.
The refocused portfolio has increased the exposure to cyclical and sometimes volatile sectors and markets. Future growth is highly dependent on global economic and political environments around the globe.
Service contracts on GE products provide high margin profits and means up selling customers a win-win business proposal. GE’s size and breadth of product offerings allows it to spread its R&D costs wider and deeper than competitors.
Shedding GE Capital and the noncore businesses is allowing GE to reposition itself for long term growth in a software defined world. GE has a unique combination of financial capability, human capital, expertise, and infrastructure to meet global needs for infrastructure and technology.
Weak oil & gas prices may hurt a key segment of GE’s growth. Although it has downsized GE Capital, the company is still exposed to credit risks and possible downgrades of its credit rating (which makes raising capital more expensive).
(updated August 2017)
GE ranks #256 (out of 286) overall and #55 (out of 57) in the Industrial Sector by the Dividend Analyzer.
GE may be towards the end of a long and painful transition. The company is thinking long term strategically. The problem is you must pay a very steep price for the stock without any assurance the revitalized company will deliver the kind of earnings needed to support the high stock value.
Type of Investor / Recommendation
Large Diversified Dividend Portfolios / AVOID
Looking For Exposure to Industrials Sector / AVOID
Deep Value Investors / AVOID
Portfolio Position Disclosures:
DVB Dividend Foundation: None
DVB Dividend Growth: None
DVB High Income: None
Arbor Asset Allocation Model Portfolio (AAAMP): None
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