GE Offers Dividend Opportunities During a Recession

by: Andrew Snyder November 14, 2008 | about stocks: GE    

Andrew Snyder

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Income investors have little to cheer about these days, with profits plunging and dividends getting slashed, but there are some glimmers of hope.

When a long-term stalwart Blue Chip like General Electric (NYSE:GE) steps out its corporate front door and tells investors to plan on their dividend payments throughout the next year, investors pay attention. When that $0.31 per quarter dividend leads to a yield of over 10%, smart investors call their brokers and grab some shares.

Instead of seeing their holding increase in value today, GE shareholders are seeing a decline. It marks one of the greatest buying opportunities you will see in your lifetime. Shares have not been this cheap in over a decade.

GE is one of the strongest, most stable companies in America. Yes, its financial arm has gotten it into some hot water, but let’s not forget this is a mega-conglomerate we are talking about.

The company has more than enough bullets in its holster to see its way through a strong recession. GE is about far more than finance. It is well positioned in strong industries like healthcare, energy development and water filtration.

But even if Wall Street continues to focus solely on GE’s finance business, it will soon learn the error of its ways. On Wednesday, the FDIC gave the company a shot at significantly lowering its borrowing costs by backing $139 billion of its debt. It is a move that assures GE will not permanently falter due to the temporary credit crisis.

GE’s revenues will fall over the next few quarters and profitability will suffer, but investors that buy now will not care one bit as they are cashing those hefty dividend checks.

Strong companies like this do not pay huge dividends often. Take this opportunity to lock in the income stream while you still can. As soon as sentiment turns around, you can bet investors will be lined up to get their hands on shares of this great American company.

Disclosure: no positions

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This article has 7 comments:

  •  
    Nov 14 09:42 AM
    When did companies stop filing to restructure and go straight to a bailout?
    Reply | Link to Comment
  •  
    Nov 14 09:50 AM
    "When that $0.31 per quarter dividend leads to a yield of over 10%, "

    .31 X 4= $1.24. Last I looked, GE was $16+/-. 1.24/16=7.75%. A nice dividend, but NOT over 10%. Or should we hold off on our purchase until GE is 12.4 or lower?
    Reply | Link to Comment
  •  
    Nov 14 11:10 AM
    pondee... look again.

    Shares of GM hit lows of $14.61 yesterday. If you would have bought then, the payout would be over 10%... nice.
    Reply | Link to Comment
  •  
    Nov 14 11:29 AM
    little math lesson...for the yield to hit 10%, the stock would have to go to $1.24/.10, or $12.40. Now that that is settled, ...
    Reply | Link to Comment
  •  
    Nov 14 02:20 PM
    GE Capital begging for taxpayer bailout money. Not a good sign for GE. How come Buffett gets GE preferred at 10% and investors weren't given the same opportunity? Instead, they want taxpayer money. All of these companies need to dilute shareholders with common and preferred shares offered to investors, who will take the risk/reward. Going to the taxpayer is not right.
    Reply | Link to Comment
  •  
    Nov 15 12:05 AM
    The yield looked enticing at $20.77 (6%), so I bought some shares, figuring the dividend would cover any downside.

    I sold at $18.47.

    I'll get interested in buying again when the dividend yield gets to 100% if at that point the Company is still saying the dividend is assured.


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  •  
    Nov 15 06:29 PM
    GE is a value trap. Back in 2002 analysts were recommending it at well above the $20+ level touting the same reasons as today. 6 years later the stock is worth much less and people are still hoping that GE is a good buy.
    A huge mega cap like GE doesn't go up much even in a normal market. In this market and with all it's struggles it's not going up anytime soon.
    Reply | Link to Comment
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