When you hear $30 versus $19 it probably sounds huge. If you consider the real call, this is really calling for a move of about 15% compounded over each of the next three years. It is perhaps even less than that if you consider that the dividend is only 3.6% here. This 15% share growth also compares to what Jeff Immelt has as an internal ambition of each unit generating 20% in annual returns on capital. The company has previously said that its dividend payment will increase by roughly the same amount as its earnings increase.
GE shares have not been at $30.00 since before the recession took it down under $10 at the peak of selling. The Barclays thesis is that this clearance for a dividend should bring the first real excitement in years as part of its turnaround. The company has said over and over that its capital unit operations were recovering, but the dividend news from the GECC unit on Wednesday morning should have been enough.
Another catalyst is that Barclays sees GE unloading its stake in NBC Universal by 2015 or so and then it expects GE to consider how to shed the appliance and lighting unit as it had previously considered.
Keep in mind that GE has a one-year price target consensus from Thomson Reuters of just over $22.50 and the highest analyst target is $25.00.
JON C. OGG
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