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General Electric’s Dividend Yield after Its 4Q17 Announcement

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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.

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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