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General Electric’s Dividend Yield after Its 4Q17 Announcement

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Dec. 14 2017, Updated 12:42 p.m. ET

Forward dividend yield

There was a time when regular income-seeking investors looked to General Electric (GE) due to its fabulous dividend payment record. After trimming quarterly cash dividends 50%, General Electric might not find a place on regular income-seeking investors’ list.

A company’s forward dividend yield is calculated by dividing a year’s worth of expected future dividend payments by its current stock price. Now, we’ll compare General Electric’s forward dividend yield with its peer group.

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Forward dividend yield

General Electric’s forward dividend yield has fallen substantially in the last three months. Currently, its dividend yield has fallen to 2.7%—compared to ~4% in September 2017. In the above chart, it’s clear that General Electric is still at the top in its industrial peer group. The company’s dividend yield was 30% higher than the peer group’s average of 2%.

Peer group’s stats

Next to General Electric, United Technologies (UTX) has a yield of 2.3%. The company provides high-end industrial and technological solutions in the US. Koninklijke Philips’s (PHG) yield equates with United Technologies’ yield. Boeing (BA) and 3M (MMM) both have a forward dividend yield of 2%. They’re followed by Illinois Tool Works (ITW) and Honeywell International (HON) with a yield of 1.9% each. Parker-Hannifin (PH) has the lowest forward dividend yield of 1.37% in the discussed industrial companies.

The dividend yield reflects an iterative rate of investment irrespective of a stock’s price. Higher dividend yields could halt the stock’s upward movement. On the other hand, a substantial fall in the stock’s price lures new investors to enter at lower levels as the dividend yield starts rising.

General Electric accounts for 4.5% of the Industrial Select Sector SPDR ETF (XLI). XLI has 15.8% investment exposure on defense and aerospace companies.

In the next part, we’ll explore whether General Electric stock has more downside.

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