General Electric Company: Why GE Stock is a Dividend Juggernaut
Investors that are seeking steady income need to reconsider General Electric Company (NYSE:GE) stock. This old-school blue-chip company is still a very reliable income generator.
General Electric stock has paid a cash dividend every quarter since June 2004. GE stock’s dividend was not even interrupted by the financial crisis of 2007 and 2008. GE stock investors still received a cash dividend every quarter in 2007 and 2008. (Source: “General Electric Company Dividend Date & History,” NASDAQ, last accessed October 3, 2016.)
What is more impressive is that the amount of the dividend has been growing in recent years. GE stock investors received a dividend of 17¢ in 2012; that grew to $0.19 in 2013, $0.22 in 2014 and $0.23 in 2016. (Source: “General Electric Dividend,” YCharts, last accessed October 3, 2016.)
General Electric stock also offers investors a constant dividend yield of around three percent. Over the past five years, GE’s dividend yield has never dropped below 2.77%, but it has been far higher on some occasions, hitting 3.91% on August 25, 2015, for example. (“General Electric Dividend Yield (TTM),” YCharts, last accessed October 3, 2016.)
General Electric Stock Is Cash-Rich
The most attractive thing about General Electric from an income investor’s standpoint is that it is a cash-rich company. Even though a lot of investors like to ignore it, GE is making a lot of money—and, more importantly, keeping that money.
General Electric reported a net income of $11.89 billion on June 30, 2016, which was in stark contrast to the negative income of -$6.24 billion that GE reported last year. This means that General Electric’s income increased by $18.13 billion during a 12-month period. (Source: “General Electric Net Income (TTM),” YCharts, last accessed October 3, 2016.)
GE also has a lot of what Warren Buffett likes to call “float.” Float is extra cash that a company can use for any purpose, such as paying dividends. General Electric reported having $91.84 billion in cash and short term-investments on June 30, 2016. It also reported having a lot of extra value in the form of $401.46 billion in assets on the same day. That, too, is money that GE’s management can tap for expansion or to increase its money-making capabilities.
What is most important is that General Electric is generating a lot of cash. The company reported making $74.71 billion in cash from investing and $4.593 billion in cash from operations during the second quarter of 2016. (Source: “General Electric (GE),” YCharts, last accessed October 3, 2016.)
General Electric Stock Is a Great Value Investment
The financial data indicates that GE stock is not only a cash-rich company, but also a value investment. Yet General Electric is also a very profitable company, reporting a profit margin of 8.63% for the second quarter of 2016. That means General Electric should have no trouble maintaining its high dividend yield.
There is another good source of income from GE stock: the return on equity. General Electric shares gave owners a return on equity (ROE) of 12.01% on September 30, 2016. That ROE increased dramatically during the first half of 2016. In December 2015, General Electric had a negative return of equity of 5.51%; that increased to 7.36% in March 2016 and 12.01% in June 2016. (Source: “General Electric Return on Equity (TTM),” YCharts, last accessed October 3, 2016.)
The Bottom Line on GE Stock
General Electric Company stock is a solid investment for income investors, as it is a cash-rich company with the resources to pay a steady dividend and drive equity growth for a long time.