General Electric: How Forward Dividend Yield Compares to Peers



GE’s forward dividend yield

Forward dividend yield is derived by dividing a year’s worth of anticipated future dividend payments by the company’s current stock price. Regular dividends appeal to income-seeking investors. In this part, we’ll compare General Electric’s (GE) forward dividend yield with its peer group.

Forward Divid

GE’s forward dividend yield has risen recently. From the above graph, it’s evident that the company ranks at the top with a forward dividend yield of 4.0%. GE’s dividend yield is much higher than the peer group’s average of 2.4%. United Technologies (UTX), the provider of high-end industrial technological solutions, ranks next to GE with a yield of 2.5%. Parker Hannifin (PH) has the lowest forward dividend yield of 1.6% among these peers. Let’s look at the yields for other peers:

  • 3M (MMM): 2.3%
  • Honeywell International (HON): 2.0%
  • Illinois Tool Works (ITW): 1.9%
  • Koninklijke Philips (PHG): 2.4%
  • Boeing (BA): 2.4%

Irrespective of a stock’s price, dividend yield reflects an iterative rate on investment. If the dividend yield is high, it can most likely limit the stock’s value. A sizable fall in the price of the stock should entice new investors to enter at lower levels with the rise in dividend yield.

General Electric forms 6.9% of the Industrial Select Sector SPDR ETF (XLI), which has a 24.1% investment exposure in the aerospace and defense sector.

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Are GE’s operating cash flows a concern?

It has been observed that GE’s operating cash flows grow substantially in the second half of each year. Digging further, GE’s cash flow statement reflects a huge fall in its operating cash flow, which turned negative in the fourth quarter of 2016. The company’s capital investments have remained in the range of $6.4 billion to $7.6 billion.

General Electric had a cash balance of ~$44.0 billion as of June 30, 2017. The company also has credit lines of ~$20.0 billion. The next two months are going to be very crucial as the new CEO (chief executive officer) John Flannery announces his future plans for the company. Considering the recent past trend, it’s a possibility that GE might raise its quarterly dividend.

In the final part of this series, we’ll take a quick look at GE’s returns to shareholders in 2017.


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