GENERAL ELECTRIC CO. $19 - New York symbol GE

GENERAL ELECTRIC CO. $19 (New York symbol GE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 10.6 billion; Market cap: $201.4 billion; Price-to-sales ratio: 1.4; Dividend yield: 3.6%; TSINetwork Rating: Above Average; www.ge.com) is one of the world’s largest manufacturers. It makes equipment for generating and distributing electricity, such as turbines (31% of revenue, 32% of earnings); aircraft engines (13%, 17%); health care equipment, such as medical scanners (13%, 14%); home appliances and lighting (6%, 1%); and locomotives (3%, 4%).

Following the 2008/2009 financial crisis, the company scaled back the activities of its GE Capital subsidiary, which provides loans and other financial services to GE’s customers. This business now accounts for 34% of GE’s revenue and 32% of its earnings.

Recession took a toll …

GE’s revenue rose 5.8%, from $170.0 billion in 2007 to $179.8 billion in 2008. Revenue then fell to $147.3 billion in 2011, mostly because demand for industrial equipment declined during the recession.

As well, in 2011 GE merged its NBC Universal entertainment operations into a 49%-owned joint venture with Comcast Corp. (Nasdaq symbol CMCSA). Because GE owns less than 50% of this venture, it no longer consolidates its results with its overall revenue.

Earnings fell from $2.18 a share (or a total of $22.3 billion) in 2007 to $0.99 a share (or $10.8 billion) in 2009, mainly due to rising losses at the finance division. Earnings recovered to $1.14 a share (or $12.5 billion) in 2010, and to $1.23 a share (or $14.1 billion) in 2011.

The company is also using its rising earnings to expand its main industrial businesses. In 2011, it spent a total of $11.2 billion buying companies that make engines, pumps, valves and other machinery. These new businesses contributed $4.6 billion to GE’s 2011 revenue.

… but the rebound is well underway

In the three months ended March 31, 2012, GE’s revenue fell 8.2%, to $35.2 billion from $38.3 billion a year earlier. If you adjust for the sale of NBC Universal in the year-earlier quarter, revenue rose 4.4%.

Earnings fell 4.3% in the quarter, to $3.3 billion from $3.4 billion. Earnings per share were unchanged at $0.31 on fewer shares outstanding. If you exclude a gain on the sale of NBC and other unusual items, earnings per share jumped 17.2%, to $0.34 from $0.29.

Thanks to surging demand for infrastructure equipment, such as motors for oil and gas pipelines, GE’s industrial backlog rose to $201 billion as of March 31, 2012, from $177 billion a year earlier.

GE will probably use its strong balance sheet to keep expanding its industrial operations. In all, these businesses hold cash of $8.0 billion, or $0.75 a share. Their debt is $11.7 billion, or a low 6% of GE’s market cap.

Dividend hike seems likely

The company should earn $1.45 a share in 2012. The stock trades at 13.1 times that estimate. GE’s improving outlook should also let it increase its $0.68
dividend, which yields 3.6%.

GE is a buy.

Copy
Link copied
Email
Print

dividend general electric oil and gas portfolio price to sales ratio new york

Pat McKeough

A professional investment analyst for more than 30 years, Pat has developed a stock-selection technique that has proven reliable in both bull and bear markets. His proprietary ValuVesting System™ focuses on stocks that provide exceptional quality at relatively low prices. Many savvy investors and industry leaders consider it the most powerful stock-picking method ever created.

Find 5 Safe Stocks to
Buy & Hold for Long-Term
Growth and Steady Income

No Credit Card Required

SEND ME THIS FREE REPORT

Testimonials

The cornerstones of Pat’s strategy–value, diversification and timelines–make his newsletter, The Successful Investor, highly profitable while minimizing risk. His advice is no-nonsense, down-to-earth and based on solid research. You’ll know what to invest in and what to avoid.

Chuck Chakrapani, PhD
Investors Association of Canada
The older I get the better dividends look. For retirees and would-be retirees who want to sleep at night, I can’t think of a better source of information on reliable growing dividend income than Pat McKeough’s newsletter, Dividend Advisor.

Jonathan Chevreau
Financial Post Columnist
As a manager of more than $500 million in mutual funds, I have access to the best brokerage research available in this country. But I still take time to read Pat McKeough’s premium newsletters

John Sartz
I appreciate the 25 years of above market returns I received by following your advice. at least 95% of my investment decisions were based on TSI recommendations.

Chuck J.
Subscriber since 1996. Inner Circle Member Since 2006
The newsletters I receive in Inner Circle Pro are fantastic! I have been following Pat’s advice for years and everything he has said has been amazing. His commentaries are brilliant, insightful, educational, rational and balanced. My returns are almost double the TSE and I have referred many of my friends who have switched over to your services.

Walter H.
Inner Circle Pro subscriber

Free Reports

5 Best Stocks to Buy This Month

The Successful Investor Approach to AI Investing

7 Winning Strategies for Dividend Investors

The Best Blue Chips for Canadian Investors

The ETF Investor’s Handbook

The Canadian Guide on How to Invest in Stocks Successfully

Power and Profits of Energy Stocks

Juniors to Giants: The Complete Guide to Mining Stocks

How to Find the Best Growth Stocks

7 Pro Secrets to Value Investing

Browse Topics

Blue Chip Stocks

Blue chip stocks are big, well-established, dividend-paying corporations with strong business prospects. These are companies that also have sound management that should be able to make the right moves to keep competing successfully in a changing marketplace.

Dividend Stocks

Dividend stocks make cash payouts that serve as a way for companies to share the wealth they’ve accumulated. These payouts are drawn from earnings and cash flow and paid to the shareholders of the company. Typically, these dividends are paid quarterly, although they may be paid annually or even monthly as well.

Value Stocks

What are value stocks?

One of the sweetest and most profitable pleasures of successful investing is to buy high-quality “value stocks” (or stocks that are reasonably priced, if not cheap, in relation to its sales, earnings or assets), then hold on to them as mainstream investors recognize the value and push up the share price.

Growth Stocks

Growth stocks are companies that are likely to have sales and earnings growth well above market average. Frequently they pay few, if any, dividends. Instead they typically reinvest any extra cash flow to promote further growth. Chosen wisely—according to Pat McKeough’s advice—high-quality growth-oriented stocks can be worthwhile additions to most well-diversified portfolios.

ETFs

What are ETFs?

ETF is an acronym for exchange traded fund.. These exchange traded funds are used to track indexes as closely as possible, since investors cannot actually buy an index outright.

How To Invest

Pat McKeough has been making investing for beginners simple—and profitable—by helping investors make big gains for more than 25 years. His advice to beginning investors is the same as it is for all investors: buy high-quality, mostly dividend paying stocks (or ETFs that hold these stocks) and evenly spread your investments over the five main economic sectors (Resources, Manufacturing, Finance, Utilities and Consumer). Pat also believes investors should avoid stocks in the broker/media limelight and focus on those with hidden or little-noticed assets.

Wealth Management

Wealth management is the practice of putting your savings to work so that it continues to grow over your lifetime and will also benefit your heirs. Wealth management encompasses many different areas of investing like long term investment planning and retirement planning.

AI Investing

Artificial intelligence (AI) is essentially the merging of today’s big computing with big data. This has resulted in breakthroughs in everything from creating machines to recognize faces with more accuracy than a human, to the development of chatbots able to collect, organize and simplify all the Internet has to say on any topic.

Spinoffs

One of the ways a company can try to unlock its own hidden value is by creating a separate company out of a corporate subsidiary. The parent company can either sell stock in the new company to the public, or spin it off—hand the stock out to its own investors.

Penny Stocks

A penny stock in general trades for under five dollars a share, and as the name implies, sometimes for pennies. Most of the time they’re young companies, or start-ups in speculative markets like mining or technology.

Mining Stocks

Mining stocks are investments in companies that produce or explore for minerals. Some of these minerals include uranium, coal, molybdenum (which is used in steelmaking), copper, silver and gold. They are affected by fluctuating commodity prices in addition to their own business and operating risks.

Energy Stocks

What are energy stocks?

Businesses that work in the extraction, refining and delivery of energy sources such as natural gas, oil, uranium and coal, are considered energy stocks.