Tuesday, June 10, 2008

GE

I recently initiated a position in GE for the following reasons.

"General Electric is one of the largest and most diversified industrial corporations in the world. GE is engaged in developing, manufacturing and marketing a wide variety of products for the generation, transmission, distribution, control and utilization of electricity. Some of GE's products include major appliances; lighting products; industrial automation products; medical diagnostic imaging equipment; motors; electrical distribution and control equipment; locomotives; power generation and delivery products. Their operations are divided into six different segments; Infrastructure, Industrials, Healthcare, Commercial Finance, GE Money and NBC Universal."

-2008 Estimated PE – 13.8X
-2009 Estimated PE – 12.5X
-2010 Estimated PE – 11.25X
-Current Yield – 4.05%
-5 Year Average Yield – 2.6%
-Current Payout Ratio – 53%
-5 Year Historical Payout Ratio – 52%
-3 year dividend growth rate – 10.56%
-5 year dividend growth rate – 9.16%
-Argus rating of "Buy" and a 1 year price target of $40
-S&P rating of "4 Stars", "Buy" and a 1 year price target of $38
-increased their dividend every year for the past 31 years.
-their dividend has been paid quarterly since 1899

I like the fact that GE has clearly defined goals (8% organic growth) and I believe they are definitely moving in the right direction with their “ecomagination” concept. I don’t think it will be long until green technologies will start to really sell, and GE is taking an aggressive stance on their green (and profitable) technologies. They also have a dominant global position in one of my favourite areas, infrastructure. Shares of this world class comglomerate have recently been under pressure due to an earnings miss caused by weakness in their financial services, healthcare and domestic consumer segments. However, their global and infrastructure segments remained strong and I believe they'll continue to due so. Although, GE may experience further short term declines I iniated this position for the long term and just couldn't resist picking up some of this world class company at valuations not seen for over a decade.

[As always please do your own research and consult your own financial advisor before making any decisions.]

38 comments:

Wiser Miser said...

With GE planning on getting rid of their appliances unit, they'll wind up even more focused on their key markets. It's an Interesting pick; It'll be one I'll place on my radar screen for further investigation.

Since it's a US-based dividend-paying stock, I'm curious if it's inside or outside of your RRSP?

MG (moneygardener) said...

great buy! I added to my position at $30.50 as well.

Anonymous said...

I agree - GE has been setting new 52 week lows for weeks and posting dividend yields north of 4%. I see the downside of owning GE at this level to be more of a downside for Imelt than for the shareholders going forward. They have been doing many of the right things like investing in wind turbine power generation and solar power just to name a few. Now if Imelt could just quit making decisions that damage the GE brand like doing business with Iran and continuing to own NBC.....

Thicken My Wallet said...

GE has been a head-scratcher. One of those companies which, fundamentally, an investor should love but the street hates it for being too big and too complex. Shows you what the street knows.

Not sure if Imelt will survive long term because of this. The pressure to break up the company is growing and Welch has undercut his creditability. He's beginning to remind me of a sports general manager who develops a great team and then is fired and his successor wins the championship and everyone forgets his role in getting the team there.

Dividends4Life said...

I am a big fan of GE. One day I will look back and wonder why I didn't buy more.

Best Wishes,
D4L

augustabound said...

@Wise Miser. Usually U.S. dividend payers go inside of your RRSP,no tax credit as with Canadian dividends.

augustabound said...

I should also add that most people like to max out their RRSP and invest US dividend payers outside.
It would mostly depend if you feel the need to max your RRSP contributions.

BlahBlah said...

Keep your US stocks outside of an RRSP unless you like seeing your dividends converted to CAN at a 1.5% skim off the top. Some smaller players allow US$ in RRSP, no bank discount brokers I'm aware of do that though.

Anonymous said...

You must remember Jack put Imelt in the drive seat and knowing Jack he would not want someone smarter or making GE look better so he could always come back with the you guys need me ego!

Chad @ Sentient Money said...

Just remember that GE Finance is a huge part of their earnings and the pain in the financial/bank market isn't over. Long-term GE looks like a great buy, but short-term...don't do it.

ROK said...

I put US stocks in my RRSP account because foreign dividends don't get the same preferential tax treatment as Canadian corporations get when invested outside your RRSP.

And, although I could be wrong, I also believe that withhold tax on dividends applies only to foreign stocks outside your RRSP. If this is true, then I see no reason to not having US stocks within your RRSP.

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