General Electric (GE) Dividend 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 5 consecutive years.
Current Dividend: $0.96
Dividend Yield: 3.2%
Cash Dividend Payout Ratio: Negative
Market Capitalization: 261 B
Enterprise Value: 306 B
Industry: Diversified Industrials
General Electric is an industrial powerhouse being redesigned to meet global needs for infrastructure and technology. The company has a long and illustrious history of achievement and high returns for investors.
The company’s recent past has been marred by bad capital allocation decisions, a historic dividend cut, and poor shareholder returns. Recently 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.
In addition to GE Capital, General Electric’s website segments its core businesses into: Aviation, Power Generation, Grid Solutions, Transportation, Lighting, Renewables, Healthcare, Water, Energy Management, and Oil & Gas.
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 capacity to finance and provide financing to customers.
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.
Service contracts on GE products provide high margin profits and make upselling 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.
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).
Dividend Analyzer Checklist
(updated January 2017)
Dividend Safety Score (17/33 points)
Dividend Per Share (ttm): $0.92
Dividend Payout Ratio (ttm): 78%
Dividend Per Share (10 Year Growth): 0%
Cash From Operations (CFO) Per Share (ttm): $0.52
CFO Dividend Coverage (CFO / DPS): 0.6 (0/6 points)
Free Cash Flow (FCF) Per Share (ttm): $-0.29
FCF Dividend Coverage (FCF / DPS): -0.3 (0/6 points)
Net Financial Debt: $-9377 M
Total Assets: $387694 M
Net Financial Debt / Total Assets: -2% (11/12 points)
Net Financial Debt to EBITDA (ttm): 1021%
Total Liabilities to Assets Ratio (Qtr.): 79%
Piotroski Score (1-9) (TTM): (6/9 points)
Profitability & Growth Score (2/33 points)
Revenue (10 Year Growth) *CAGR > 4.14%: -1.5% (0/4 points)
EPS Basic Cont. Operations (10 Year Growth) CAGR > 4.14%: -20.3% (0/4 points)
Cash From Operations (10 Year Growth) CAGR > 4.14%: -6.2% (0/6 points)
Operating Earnings Yield (ttm): 6.2% (2/7 points)
Net Income (ttm): 11409 M
Gross Profit (ttm): $37204 M
Total Assets: $387694 M
Gross Profitability Ratio = GP / Total Assets: 10% (0/12 points)
Cash Return On Invested Capital (CROIC)(tttm): -1%
Return on Invested Capital (ROIC): 4%
Return on Invested Capital (ROIC) (5 Year Median): 3%
Return on Invested Capital (ROIC) (10 Year Median): 3%
Valuation Score (7/34 points)
Free Cash Flow Yield (ttm): -0.9% (0/9 points)
EV to EBIT (ttm): 22.1 (0/9 points)
EV to EBITDA (ttm): 15.8 (3/9 points)
PE10: 23.4 (4/7 points)
Price to Sales Ratio (ttm): 2.4
Price to Book Value (ttm): 3.4
Price to Earnings Ratio (P/E) (ttm): 28.0
TOTAL POINTS – (26/100) (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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(updated January 2017)
Type of Investor / Recommendation
Large Diversified Dividend Portfolios / Avoid
Looking For Exposure to Industrial Sector / Avoid
Deep Value Investors / Avoid
GE ranks #228 (out of 247) overall and #56 (out of 57) in the Industrial Sector by the Dividend Analyzer.
I don’t see any reason to own GE at this time. Its Dividend Safety Score is average, its Profitability & Growth Score is troubling and its Valuation very expensive.
Portfolio Position Disclosures:
DVB Foundation Portfolio – None
DVB Dividend Growth – None
DVB High Income – None
Arbor Asset Allocation Model Portfolio (AAAMP) – None
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