General Electric Co. (NYSE: GE) had been trading up marginally during Friday morning, but news of the company’s dividend is not exactly creating any new interest. GE released news that its board of directors declared a $0.19 per share dividend for its common stockholders. This is the same payout that has been seen for two prior quarters. Some investors may have been hoping for a GE dividend hike sooner rather than later, but that dividend hike is likely to come late this year.
Companies which seek to raise their dividends generally announce a raise once per year if they are able to. What investors should know this year is that GE is living up to its promise so far even if there were some hoping for a higher payout this time around. Perhaps the latest GE Capital dividend to the parent company brought on some hope that GE would again raise its dividend sooner than normal. The problem is that GE is still facing the same issue as the rest of the major corporate giants and conglomerates: business is growing slowly, and that growth is expected to remain slow.
The current annualized payout of $0.76 per share compares to a normalized earnings consensus estimate of $1.66 from Thomson Reuters. Without considering the GAAP earnings issues and extraordinary payments and items, this payout ratio comes to about 45.8% of the company’s expected earnings for this year. GE has previously projected that it wants to pay out roughly 40% of earnings. That still leaves room for GE to continue buying back its common stock through time, as well as to make bolt-on acquisitions and invest in capital spending as well as research and development.
Earnings growth is expected to be just under 10% in 2014 over 2013, so we will only be calling for GE to increase its next dividend hike towards the very end of this year. We would also expect that GE will raise the payout to $0.21 from $0.19 per quarter. The good news is that GE currently yields 3.2% and that is still higher than the conglomerates it competes against.
GE’s latest major move to put CFO Keith Sherin as the CEO of GE Capital is a smart move. it was also a very targeted move. GE has stated that it wants to continue to improve the credit quality of GE Capital while also shrinking the total size of GE Capital versus the rest of GE. The conglomerate’s aim there is to be valued more and more as an industrial giant rather than being valued as a bank of finance operation which also has a large industrial presence.
Today’s dividend which was announced will be payable on July 25, 2013 to holders of record as of June 24, 2013. The stock will trade ex-dividend date on June 20, 2013. GE shares are down 0.3% at $23.61 against a 52-week trading range of $19.29 to $24.13. Thomson Reuters shows a consensus price target of $25.53 from Wall Street analysts.