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What Investors Could Expect from General Electric in 2Q17

PART:
1 2 3 4 5
Part 4
What Investors Could Expect from General Electric in 2Q17 PART 4 OF 5

A Look at General Electric’s Dividend Yield in 2017

General Electric and dividends

In this part, we’ll discuss General Electric’s (GE) dividend distribution. In January 2017, General Electric increased its dividend by $0.01 to $0.24 per share, resulting in an annualized dividend per share of $0.96. The company’s dividend per share was $0.92 for two years. Before we check GE’s free cash flow to support the dividend payments, we’ll take a look at the company’s dividend yield.

A Look at General Electric&#8217;s Dividend Yield in 2017

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Dividend yield

Over a quarter, GE’s dividend yield has risen, the result of a lower stock price in 2Q17. General Electric has a dividend yield of 3.6%, which looks reasonably low. Let’s compare it with peers’:

  • Honeywell International (HON): 2%
  • United Technologies (UTX): 2.3%
  • The 3M Company (MMM): 2.2%
  • Boeing (BA): 2.7%
  • Parker-Hannifin (PH): 1.6%

The iShares US Industrials ETF (IYJ) has an 11.1% exposure to aerospace and defense companies. Investors wanting indirect exposure to General Electric could consider IYJ. The company makes up 7.7% of its portfolio holdings.

GE’s cash flow

Dividends are paid with a company’s free cash flow. Free cash flow is derived by subtracting capital expenditure from operating cash flow. Usually, a company uses its spare cash for dividends, reinvestments, or stock buybacks. GE’s industrial operating cash flow is a concern for the company.

In 1Q17, GE’s industrial operating cash flow was $1.0 billion less than it had expected. A rise in GE’s dividend mostly depends on it meeting the industrial operating cash flow target of $12.0 billion–$14.0 billion in 2017. In the last part of this pre-earnings release series, we’ll look at analysts’ views on General Electric and its peers.

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