Friday, January 23, 2009
General Electric's Dividend, Is It Safe?
Earlier today, earnings came out for more companies including conglomerate monster General Electric. Just a quick take on what GE's earnings mean for you. First off, General Electric reported a 40% loss in profits, takings its stock down another 7%. Its obvious GE's Capital branch hurt revenue, however GE also stated low sales in its Consumer Electronics branch. GE Consumer Electronics is a reminder that consumer spending is still down, do not believe analysts when they say consumer spending is coming back. Also, earlier today GE CEO Jeffery Immelt came on CNBC and stated that they are standing by their dividend of $1.24 for the year of 2009. Many financial analysts are coming on T.V saying GE is going to have cut the dividend, but that might not be the case. People forget that GE Infrastructure actually had an increase in revenue this year, their windmill technology has been skyrocketing and will provide revenue for the dividend. As the Obama Stimulus plan goes into action, watch for GE to receive a good amount of business in the second half of 2009 in its industrial arms. The cash GE receive from its industrial arms can back up its dividend. GE also has over $40 billion dollars in cash. CEO Immelt is very serious about maintaining the dividend and satisfying GE investors. Let me say it again, Immelt is VERY SERIOUS about keeping the dividend. He think it is the best way to allocate GE's cash in today's market. I think GE will maintain its dividend, making it an excellent dividend investment for 2009. GE is yielding almost 10% percent right now. With share prices of all stocks taking a beating this year, GE's 10% dividend might provide a nice safe haven.
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Of course, the dividend costs them about $12 billion. They could cut it in half, it'd still yield 5%, and save $6 billion.
ReplyDeleteThat is true but Jeffery Immelt thinks the best way to allocate that money is giving it back to the shareholders. Most people don't realize that the dividend actually already took a hit. For the first time in 30 years GE did not increase its dividend. Which I guess is GE's way of saving money on the dividend.
ReplyDeletei have heard g-e is in trouble because they have derivatives which will become worthless--debt swap instruments of some kind under the radar?
ReplyDeleteI am not sure about that... but from the latest GE Earnings call they are expecting a loss of 10 billion dollars in GE Capital in 2009. Today they sliced the dividend to 10 cents, saving them 9 billion dollars which will help them out with losses in GE Capital.
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