Double Dividend Increase at General Electric (GE)

In a move that will excite dividend focused investors, US giant General Electric (GE) has raised its distribution for the second time in this financial year.

 

The share responded positively adding nearly 3% and this jump leaves the counter trading on a yield of 3% and a price to earnings multiple of 16 times earnings.

 

It has been an up and down year for GE (GE) shareholders with the share trading at $15 in December 2009, rising to a high of $19.49 and then slipping to $14.26 in July but the positive signs around the dividend may reassure investors. An important factor to remember is that GE (GE) has paid a dividend every quarter for more than 100 years and that might explain why the top 50 institutional investors in the US make up more than 33% of the owners of the company.

 

Commenting on the increase in dividend CEO Jeff Immelt said: “We are able to increase the GE (GE) dividend for the second time this year because of continued strong cash generation, accelerated recovery at GE Capital and solid underlying performance in our Industrial businesses through year-end 2010.”

 

In addition, the Company plans to continue capitalizing on complementary and financially attractive inorganic growth opportunities, opportunistic share repurchases and investing in innovation as part of its capital-allocation efforts.

 

The operating environment for GE (GE) has looked rosier throughout the year and the company reported a solid third quarter in October. Earnings per share were up 32% while net income jumped 29% to $3.2bn. In October the group was sitting on a mammoth $78bn in cash and cash equivalents while delivering $3.8bn in cash in the quarter.

 

GE Capital, the lending business, has been a problem child for the group having been caught up in the global credit storm and investors will be breathing a sigh of relief that the unit is getting back on its feet. GE Capital continues to outperform expectations and position itself to play offense.

 

GE Capital is seeing strong performances in both the Consumer and Commercial Lending and Leasing businesses. This bodes well for further growth and gives the group insight into the underlying strength of the economy.

 

If GE (GE) can signal that the market is recovering by raising its dividend twice in a financial year then investors can take it as a pretty clear-cut sign that the world is emerging from the period of economic slumber.