Investors Will Have To Keep Waiting for GE to Increase Their Dividend
- March 17, 2010
- Dividend Aristocrats, Dividend Investing, Dividend Stocks
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Speaking at a Goldman Sachs investor conference yesterday, General Electric CFO Keith Sherin indicated that profits at the conglomerate will begin growing again in 2011. GE’s profits have been in decline since 2007 and Wall Street expects another decline this year.
Dividend investors also have reason to cheer as GE’s CFO also indicated that the company plans to begin growing their dividend again, but not until 2011.
Early in 2009, GE slashed their quarterly dividend by 68% just as the stock was hitting its lowest point. Prior to the dividend cut, GE had been a member of the elite Dividend Aristocrats – stocks that had increased their dividends for 25 consecutive years or more. In fact, the dividend cut was the first for the company since 1938.
With earnings expected to begin recovering in the second half of this year, many dividend investors were hoping that GE would hike their dividend in 2010.
While GE’s dividend yield is a rather average 2.3%, investors who dumped their shares when the company cut their dividend are surely kicking themselves now. Since cutting their dividend, GE stock has soared 115% and is up 21% in 2010 (second only to Boeing among Dow stocks).
Wall Street’s consensus estimates call for $1.00 EPS in 2010 for GE. With an annual dividend of $.40 per share, GE would have a dividend payout ratio of 40%. In 2006, GE’s dividend payout ratio was 46% and in 2007 it was 47%. With EPS expected to climb to $1.22 per share in 2011, a more modest 41% target dividend payout ratio would result in a dividend increase of 25% to $.50 per share. While 25% is a significant increase to their dividend payment, it may take such a bold move to win back dividend investors who are still smarting from last year’s huge dividend cut.
