How GE’s Forward Dividend Yield Compares to Its Peers



General Electric’s forward dividend yield

The forward dividend yield is derived by dividing a year’s worth of expected future dividend payments by the stock’s current price. In the current environment with a soft global economy, industrial conglomerates’ growth slowed down. In such conditions, dividends become more important because they appeal to the regular income-seeking investors.

In the above graph, you will notice that General Electric’s (GE) forward dividend yield is 3.1%. It’s still above the industry’s average forward dividend yield of 2.6%. Only Koninklijke Philips NV (PHG) and Siemens (SIEGY) have a forward dividend yield of 3.17% and 3.2%, respectively. Parker-Hannifin (PH) and Honeywell International (HON) have the lowest dividend yield of 2.1% each.

General Electric is included in the portfolios of 94 ETFs. The company makes up 11.0% of the Industrial Select Sector SPDR Fund (XLI).

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General Electric’s forward dividend yield

General Electric has been aggressively restructuring its entire business portfolio. It seems that the company has been desperately trying to shun its “over-diversified” tag. The company’s ambition to return to its roots has seen a series of massive divestments in the last two years.

Also, the company’s commitment to reduce its huge debt primarily attributable to the GE Capital business is noteworthy. However, the company’s debt-to-earnings before interest, tax, depreciation, and amortization ratio of 9.5x is still much higher than the industry average of 4.0x.

To sum it up, there’s limited room for the company to increase its dividend in the next few quarters. Ongoing capital expenditure required for research and development (~$10.0 billion) accounts for ~10% of the revenue plus the existing debt servicing. This makes it challenging for another hike in dividends in the near term.

In the next part, we’ll look at General Electric’s shareholder returns so far in 2016.


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