Expect General Electric to Deliver More Dividends in December
General Electric has climbed back from the brink over the past five years, as the company has survived the pain that its GE Capital financial arm wrought on the conglomerate during the financial crisis. The company lost its status as a Dividend Aristocrat by failing to raise its dividend for the first time since 1975 and made a painful dividend cut of nearly 70% in 2009. But General Electric has bounced back recently, and despite having already raised its dividend five times over the past three years, attentive investors are looking for the company to deliver another increase that should keep its yield comfortably ahead of fellow conglomerates 3M and United Technologies .
General Electric has undergone a huge transformation in recent years, returning to its industrial roots with a particular emphasis on energy. That has produced big successes for GE, as the booming oil and gas industry and the rise of renewables like wind and solar have positioned the conglomerate well to take advantage of exciting growth prospects in the sector. In addition, a big boost in aerospace activity has helped the company's aviation segment produce strong growth as well. But investors have to remember the rapidity with which General Electric's past success came to a screeching halt during the financial crisis. Let's take a closer look at General Electric to see whether it's likely to raise its dividend before the year is out.
Dividend Stats on General Electric
Current Quarterly Dividend Per Share
Number of Consecutive Years With Dividend Increases
Source: Yahoo! Finance. Last increase refers to ex-dividend date.
Will General Electric make it four straight?
General Electric's recovery has gone well beyond its dividend, as its stock has also bounced back sharply since early 2009. The company has kept its share price moving sharply higher, with gains of 27% over the past year. Yet those returns haven't kept General Electric up with United Technologies or 3M, both of which have posted one-year returns in the 40% range.
One area in which General Electric and United Technologies have both thrived is in aerospace. GE has an extensive aircraft-engine business, matching up well against United Tech's Pratt & Whitney division and getting its share of orders on both the military and commercial side of the aerospace industry. Given the huge rise in demand for aircraft as airlines seek to modernize their fleets and gain from new opportunities for fuel efficiency and cost reduction, both General Electric and United Technologies should see continued growth in the segment.
Yet General Electric's bigger focus has been on energy, where it has done a better job than 3M in capturing the full breadth of the opportunities for profit. From its longtime strength in wind energy and electrical infrastructure to newer forays into the oil and gas services industry and liquefied natural gas processing niche, General Electric has made big bets on the ability of the energy boom to last for years. In particular, exposure to the growing undersea energy area could bring huge rewards for General Electric, as high oil prices make even ultra-deepwater projects economically viable and open up huge potential resources for development in the decades to come.
General Electric has also been smart about looking toward its future. Smart investments in budding areas like 3-D printing and its concept of the "Industrial Internet" could drive future profits and give it important early mover status in key technologies. Such moves are essential to keep innovative competitors like 3M and United Technologies at bay.
General Electric Dividend data by YCharts.
General Electric has been fairly quick in getting its dividend back up toward pre-crisis levels, with boosts of 12% to 13% over the past two years adding up to a near-doubling of its distribution since mid-2010. Profit growth has helped support these increases, but GE will need to keep working hard to keep earnings growing if it wants to keep its dividends rising at a double-digit percentage pace. By contrast, both United Technologies and 3M have been more conservative in keeping their payout ratios lower than General Electric.
When will General Electric boost its payout?
Last month, General Electric said it would keep its dividend unchanged for the quarter, with its $0.19 quarterly payout arriving in shareholders' accounts last week. That marked the fourth-straight quarter for the dividend at its current level, making it likely that General Electric will send its dividend higher during the fourth quarter.
It would be natural for General Electric to maintain its $0.02 per share pace in its increases, making a December quarterly payment of $0.21 per share seem reasonable. That would push the yield back above the 3% mark and leave it well ahead of 3M and United Technologies. That might not get the dividend back to its 2008 high as soon as some shareholders would like, but it marks a smart balance for General Electric between healthy dividend income and future growth prospects.
Why General Electric has made investors so happy
General Electric's recent gains just prove how dividend stocks can make you rich. It's as simple as that. Over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.
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The article Expect General Electric to Deliver More Dividends in December originally appeared on Fool.com.
Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends 3M. The Motley Fool owns shares of General Electric Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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