Recent Buy

buyIt might be tough for some investors to continue allocating fresh capital in a hot stock market, but I continue to scan for attractive opportunities and make purchases that make sense for me. The S&P 500 sets new records seemingly daily lately, but I have my own records to worry about: Namely, I want to break new dividend income records as often as possible. I can’t attain financial independence and pay for all of my expenses via dividend income if I let fear paralyze me.

I discussed some equities on my watch list for this month, and I was as honest as I could be in terms of what I was looking at and why. After reviewing this list a few times and really scanning over the opportunities I saw in front of me I finally decided to settle on one company in particular.

I purchased 60 shares of General Electric Company (GE) on 3/10/14 for $25.94 per share.

General Electric is a diversified energy infrastructure, financial services, and industrial products company. They serve customers in more than 100 countries. They operate in eight segments: Power & Water, Oil & Gas, Energy Management, Aviation, Healthcare, Transportation, Home & Business Solutions, and GE Capital.

I initiated a position with this company in June of last year, and I’m a happy shareholder thus far. Management has been crystal clear in its plans, and has so far executed.

The backlog ended at a record $244 billion at the end of 2013. That’s a lot of work cut out for the company, and I look forward to seeing orders filled while GE continues to sign new contracts. They’re incredibly diversified not only in their business segments, but also in geographical markets. Revenues for GE now exceed $1 billion in 24 countries. The fantastic thing about GE is their breadth and scale. Through their various segments the company manufactures diverse products like wind turbines, water treatment equipment, jet engines, subsea drilling and production systems, locomotives, medical imaging products, and consumer appliances, among many, many other products. It’s really a global powerhouse of a company.

GE continues to move closer to its core businesses and away from the riskier financial services arm in GE Capital – which shook the company to its core during the height of the Great Recession. By 2015, GE aims to have GE Capital contribute only 30% of earnings to the company. As part of that objective, GE plans to spin off a major portion of GE Capital by way of the credit card and retail lending business. Later this year they will offer up to 20% equity in the business through an IPO, and the remaining 80% of the business will be spun off to shareholders sometime in 2015. This is a great move, as it allows GE to focus on manufacturing the major products that it specializes in, while also allowing GE Capital to serve the purpose it’s meant for: Commercial financing for the middle markets that purchase its core products.

GE’s growth profile over the last 10 years paints a mixed bag. They seen massive growth running up to the Great Recession due to leveraging in its finance arm, but the aforementioned shrinking of this segment has led to reduced earnings. GE is making some plays for the long haul, but in the meanwhile certain metrics may lag. It’s not to be taken lightly that they’re reducing GE Capital, as this is a major part of the business. At one time it made up about half of the business based on net income. So by shrinking GE Capital, management is also shrinking GE as a company. But they’re doing so to better focus on the plethora of products they specialize in, and this is where the future of GE lies.

Revenue was $152.4 billion in 2004, and finished at $145.7 billion in 2013. That’s a compound annual growth rate of -0.49%. Yes, negative. EPS was $1.59 in 2004 and $1.47 in 2013. That’s a CAGR of -0.87%. Again, negative. But, luckily, I wasn’t invested in GE back in 2004. And, of course, we don’t invest in the past. When investing we must look at what the company is doing to propel growth going forward, and I think GE has the right mix of products, assets, and plans to grow and be an even better company in the future. EPS has been growing solidly after bottoming out at $1.03 in 2009, and I think that growth is set to continue. S&P Capital IQ predicts an EPS CAGR of 7% over the next three years.

Dividend growth also paints a mixed bag. After years of being a dividend titan and raising dividends for 32 consecutive years, GE was forced to cut the quarterly dividend back 2009 by 68% from $0.31 per share to $0.10. Of course, this cut came after management insistence that the dividend was safe when it really was not. The good thing is that the problems (GE Capital’s leverage and exposure to retail lending) that led to the cut have been addressed, and GE is making active changes to strengthen the business going forward. Since the dividend cut, GE has raised its dividend six times – the most recent raise being 15.8%. The company now pays out $0.22 quarterly per share and yields 3.38% at today’s price. The payout ratio stands at 59.5%, so I anticipate a nice dividend raise later this year. For perspective, GE returned $18.2 billion to shareholders via dividends and share buybacks in 2013.

The balance sheet has improved substantially over the last few years as GE continues to reduce leverage at GE Capital. The debt/equity ratio now stands at 170%, and the interest coverage ratio is 2.6. The balance sheet still needs improvement, and this is something that GE continues to work on.

GE believes infrastructure spending will reach $60 trillion by 2030, in part to support a growing worldwide population and rising global middle class consumer. GE aims capitalize on this by grabbing a large part of this spending, and as the world’s largest and most profitable infrastructure company they’re well positioned.

Of course, there are risks with GE. Their plan to continue growing the infrastructure and industrial side of the business could falter based on global economic slowdowns. In addition, although GE Capital is planned to only be about 30% of the business by 2015, that’s still a significant portion of the business with certain regulatory and capital risks of its own. Competition is always a risk as well, especially if GE cannot execute key strategies.

I think by investing in GE I’m making a bet on US and global growth continuing for the foreseeable future. There is no doubt that there will be more people on this planet 10, 20, and 30 years from now. And more people requires more infrastructure, energy, transportation, etc. GE bills itself as a company that allows the world to work better. And I like my chances in betting on the world being a bigger, better, and brighter place decades from now.

GE currently trades hands for a P/E ratio of 17.63. I valued the company using a Dividend Discount Model analysis with a 10% discount rate and a 7% long-term growth rate. This gives me a fair value on shares of $31.39. Overall, I’d say shares here are attractive with possibly a small margin of safety, assuming management can continue to execute and the company’s core portfolio can overcome the losses from the finance arm.

This purchase adds $52.80 to my annual dividend income based on the current quarterly payout of $0.22 per share.

My portfolio holds 45 positions. This is unchanged since the last update, as this was an addition to an existing investment.

I’m going to include current analyst valuation opinions below, as I use these to concentrate my reasonable valuation estimate.

*Morningstar rates GE as a 4/5 star value, with a fair value estimate of $29.00.
*S&P Capital IQ rates GE as a 4/5 star Buy, with a fair value calculation of $26.10.

I’ll update my Freedom Fund in early April to reflect my recent addition.

Full Disclosure: Long GE

What do you think of GE here? Think it’s a buy? Or not interested? Why?

Thanks for reading.

Photo Credit: Stuart Miles/FreeDigitalPhotos.net

Comments

  1. Ravi says

    I’m torn on GE. I want to be more bullish on a 5-yr horizon, which is how far I try to think, but I just can’t get there. Dividend is solid, but at 60% the company needs earnings growth in order to fund a growing payout in the future. It’s well diversified, but a contrarian argument would be that it is unfocused. Is there any value in making home appliances and jet engines? I’m skeptical…

    For me, I see investing in GE as a bet on management execution. They have more than enough business and geographies to succeed. Spinning off a unit (or a stake) could easily unlock a large amount of liquidity to take on new projects. For me, it’s not convincing enough on a 5-yr horizon; however, on a 10-15 yr period it’s hard not to support it. I hope they double their payouts for you! I’m sorry to say I’ll miss this train.

    • says

      Basically, I agree with Ravi, in some years GE will have another face, and it’s hard to know what kind of business will be part of GE.

      I also will miss this train.

      For my income portfolio, maybe I should say russian mountain portfolio, I recently purchased 150 stocks of NLY. The main reasons are the improvement in the spread over the last quarters and it’s price below book value (hoping it is estabilizing around usd12). I any case I intend to keep mreits below 5% of my overall portfolio.

      Kind regards,

      • Ravi says

        I’ve also owned NLY since 2012. Payouts have shrunk and share price has gone down 40%, but through reinvesting I now own 25 shares more than when I bought. My bet here isn’t on a consistent dividend, rather, a contrarian holding in my portfolio with risky payouts. As long as they don’t go belly up, they will basically go in the opposite direction of interest rates, so come the next recession, my position may double and may be a good time to take some gains and move to the next big thing.

        It’s a risky bet, so I’ll see how it plays out. In the scheme of things, it won’t really matter.

      • says

        Manefla,

        I can understand that GE isn’t for everyone. I think the valuation makes sense here, and there is a lot to like about the company. But there’s many high quality companies out there.

        I wish you the best of luck with NLY. That’s definitely a security that is not on my radar. I determined years ago that mREITs were not for me.

        Take care!

    • says

      Ravi,

      I don’t blame you for missing this train. There are many high quality companies from which us investors can choose from. No sense in investing in one that you’re not totally behind.

      And my time horizon is quite long, as I hope I’m still alive and invested in equities many decades from now. So I can ride out a few storms here and there. I think EPS growth over the next few years will be high enough to warrant further high dividend growth, but we’ll see.

      And I would agree with you on GE being a bet on management. I’m quite sure running a giant conglomerate isn’t easy, and I think Immelt takes too much heat for issues that had started before he was in charge. However, I think management has been great in terms of communicating plans and then executing on those plans.

      Cheers!

  2. David says

    DM, I think 10 or 20 years down the road you will look back and give yourself a pat on the back for pulling the trigger on a great American Company like GE for less that $26 a share. I am still researching this massive conglomerate and trying to get my head wrapped around all the many business lines these guys are in before making GE my 46th business partner.

    • says

      David,

      Wow, so we both have 45 investments! That’s great to hear. :)

      GE can take a little while to understand. I spent my entire Saturday reading through the annual report and some analyses on the company. It wasn’t quick, I can tell you that.

      But I think jettisoning the retail lending business and focusing on the core will propel this company back to greatness for decades to come. At least, I hope that’s the case!

      Best regards.

  3. Dividendmom says

    I am awestruck how you have the guts to buy these stocks in hot market, but I agree that you look at value rather than the current market. I was busy with a convergence conference in atlanta for the past 1 week, got back to work and posted my February dividends. I am not sure if I will buy something this month, my rental is still out there waiting for a buyer ugh!
    Dividend mom

    • says

      Dividendmom,

      I hope your rental sells and you get a healthy sum of capital to allocate. Are you going to do another rental, or are you investing in equities/elsewhere? I certainly wish I had more cash, but don’t we all?

      Best of luck!

      Take care.

    • says

      If a company is truly a good value it won’t matter when you buy, but if you have a lot to invest you might consider graduating your full intended investment over time if you think the market as a whole is overvalued.

  4. says

    I’ve been on the hunt for a stock in the Industrial sector. I had it shortlisted to DE or industrial services like railroads (NSC, CNI). But after the lack of raise in dividends from DE this year, I think I will be dropping DE from the list. Now, I am thinking that conglomerates like GE or UTX may not be a bad idea. Your move has given me a hint on where to look at. Keep up the great work.

    Best wishes

    • says

      R2R,

      I don’t track DE too closely, but I seen they declared the same dividend for the fifth quarter in a row. A bit troublesome, but they still have a while to turn it around. I remember looking at DE in the low $80s not too long ago. It looks like it’s recovered from that level pretty nicely.

      I don’t think you can go wrong with UTX or GE. I picked GE because of the higher yield, broader diversification, and the fact that I already owned (and knew) it. But UTX is a fine company as well, and one that fared much better during the Great Recession.

      I hope to own UTX as well sooner rather than later.

      Best wishes!

  5. says

    I’m mostly in agreement with Ravi, but I can’t criticize your decision to buy. I am concerned that dividend growth might slow a bit, but obviously I can’t be sure of that. I’ve owned GE for several years. It’s about 3.5% of our div portfolio with a 4.4% YOC. My margin of safety price for further buys is $25 or below, so we aren’t that far apart.

    You also have a longer time frame to hold the stock than I do. I’m retiring within a year, so I’m a little more cautious. My guess is that you will do fine with this stock, especially over the long haul.

    • says

      Steve,

      Thanks for stopping by.

      I wouldn’t mind GE dropping to $25. I don’t know if I’d add more or not at that level, but I wouldn’t mind the opportunity. :)

      And different time horizons will certainly affect one’s stock picks. I do have a rather long time horizon, although not as long as it might look. Since I’m aiming to retire by 40, I invest more like a 50 year-old than I do a typical 30 year-old. By that I mean I do take yield into consideration when looking at stocks, and my portfolio is rather limited on some of the lower-yielding fare. However, I won’t pass up on a great investment at an attractive price if the yield is a little lower than I’d like. I’m willing to stretch in that department because I plan on holding on to many of my stocks for decades to come.

      Best wishes.

  6. says

    Very cool to see you pull the trigger on GE. I agree that 10 years from now GE will look nothing like it did just 5 years ago and you’ll be a happy investor for making this decision. I’m not far behind you.

    • says

      Zach,

      Thanks! I hope to have you aboard as a GE shareholder soon, if you’re not already.

      And I agree that GE will look much differently 10 years from now, and I really believe that will be for the best.

      Thanks for stopping by!

      Best wishes.

  7. says

    Nice pickup Jason. I figured you’d be making a move into GE after your watch list post. Personally, there are some lingering headwinds, but management has set a fairly solid path, and I think they will be a good buy in the mid to long-term. Either way, it should be a good investment for you considering your timeline of forever!

    • says

      W2R,

      Thanks so much. I definitely think my long-term time horizon works to my advantage with many holdings, but certainly more so with more cyclical plays like GE. But if infrastructure spending worldwide is even half of what GE believes it will be this bodes very well for the company.

      Congrats to you on a very solid February! :)

      Best regards.

  8. says

    Congrats on the recent buy Jason, and thanks for the analysis! GE is currently on my list, however I am in a holding pattern for now as there are a few other positions that I want to initiate/grow first. It’s difficult having so many stocks I want to buy with not enough capital to do it. Even in this market I still see deals abound. Thanks for sharing and take care!

    • says

      Dividendasaur,

      So many stocks, so little capital. You’re preaching to the choir, my friend! :)

      Best of luck filtering your watch list into a winner or two. I know the process can be a little time consuming, but certainly fun as well. At least, that’s how it is for me.

      Cheers!

  9. DivSaver says

    Nothing much to add, other than GE is a solid company. It’s been around over 100 years and is still trucking. Just think, another $50+ paid to you every year from here to infinity. Nothing wrong with that!

    • says

      DivSaver,

      You nailed it there. That’s rising passive income I can likely count on for a very long time, or at least that’s the hope. Of course, if GE suffers another meltdown I’ll have to take a hard look at the holding. But I’m hoping they’re able to rebuild their 30+ year dividend growth streak by then. :)

      Cheers!

  10. says

    I think you’ve made a good buy. I think GE was once declared the most admired fortune 500 company. I am rather overweighted in the industrial sector at the moment and I have to bolster other sectors (namely healthcare), so I have not given GE serious consideration. But maybe someday I’ll change my mind.

    • says

      Spoonman,

      I had some room in the industrial sector, so GE made sense for me here. But I can understand you wanting to bolster healthcare holdings. I need to do the same, actually. I’d love to own a piece of BDX some day.

      Hope all is well!

      Best regards.

  11. Justin says

    GE still looks like a good value here. It’s been my largest holding for quite some time, and there aren’t a lot of compelling deals in industrials right now.

    • says

      Justin,

      I agree with you. The valuation makes sense here, especially relative to the rest of the market. I also had some room for GE as it was a rather small holding for me, so it just worked out right here. Onward and upward. :)

      Take care!

  12. says

    Hey Jason, nice call on GE, low risk and good long-term. There is never a right time to buy over that kind of time frame so doing what you are doing at the moment is absolutely fine, it works out over time. I’m currently eyeing up other stuff which is more risky :) but i like IBM in the 160-170$ for a medium play to $200 again, i think they are going to reinvent themselves with the cloud as people have written them off ( again ) – will be interesting to see how that pans out. I’m just dealing with options on that one. The other one i have been cost averaging into for ages is LYG – Lloyds, UK ADR. i can see this stock bumbling around this 5$ level for a while ( i started at $3 ) but it shouldn’t be too long before the government is out completely and they can resume their dividends…not something that fits into most people’s criteria here right now but i think long-term prospects will be good for dividends on this one eventually.

    • says

      tales,

      I’ll have to take a look at LYG. Never took a look in that direction.

      We’ll see if IBM goes down to those levels again. It’s certainly possible. I’m not against doubling my position in the company if the capital is there and it appears to be the most compelling opportunity for me. I really like IBM for the long haul. The buybacks are just crazy with that company.

      Thanks for stopping by and sharing!

      Best wishes.

    • says

      DividendVenture,

      Thanks for the support! I certainly hope you’re right about that. In the meanwhile, I’ll happily collect and reinvest the dividends. That’s the name of the game, right? :)

      Best regards.

  13. says

    I’ve been looking at GE as well but luckily the markets are heating up a bit when I need to conserve cash for the rental. I know the late January/early February dip was hard for me to stay out of. Well, I didn’t stay out of it at all. I might add some GE here in the next few days just to be able to make some kind of purchase. Definitely not a steal at these prices but it’s a decent enough value to add some shares.

    • says

      JC,

      I agree. Definitely not a steal here, but the valuation is pretty sound. The huge backlog gives me a warm, fuzzy feeling. We’ll see how it turns out!

      Good luck with the rental property! I can imagine that’s scary and exciting all at the same time. :)

      Take care.

  14. Monty says

    I think GE is worth owning as part of a balanced portfolio. GE is currently one of my largest holdings. I do feel that the bull market is winded. It wouldn’t surprise me if things come down 10-20% or so this year. 5 years of a bull market is a heck of a long time. I’m personally debating if I should raise cash or continue to buy. Decisions decisions.

    • says

      Monty,

      I hear you. It’s tough to invest right now with the market at an all-time high. But I take consolation in my rising dividend income, and that’s what I try to focus on.

      I don’t know what’s going to happen to stock prices, but I do know what’s going to happen to my dividend income if I keep investing: It will rise. :)

      Cheers.

  15. says

    Hey Jason nice buy! After your last article you really got me looking more into GE but in the end I decided to buy O and KMI this month. I’m sure I will join you as an owner of GE at some point down the road. Keep up the good work.

    BJ

    • says

      BJ,

      I think you made some fine purchases there. KMI is definitely one I’d be loading up on right now if I weren’t already heavily invested. And O is a high quality REIT. Unlikely to go wrong there.

      Keep up the good work on your end too!

      Take care.

  16. Jerry says

    Nice Buy. GE is is my third largest so I’m not looking for more but I love GE long term. I feel it’s just Solid. Maybe not the MVP of the team but a solid consistent player in the game for the long hall. Pencil in GE and let it ride. Nice move. I wound up buying some BNS yesterday.

    • says

      Jerry,

      Haha. I like the analogy there. I guess I would agree. Would I place GE in the same regard as Coca-Cola? No. But I think it’s a solid player. :)

      Nice buy there on BNS. That’s one that I’m looking at as well. It’s popped a bit lately, however. I’m just biding my time waiting for the right opportunity.

      Best regards!

  17. says

    I can only wish I loaded up more on GE in taxable account as well as these ROTH holdings: GIS (just announced a 7.9% increase) ,MMM, O, and KMB at basement prices. The Generals keep saying raises for everyone!

    • says

      SWAN,

      Gotta love that dividend raise! That’s a fairly solid increase in dividend income. GIS is another company that I’d love to have in the portfolio sooner rather than later.

      MMM and KMB are also a couple that have eluded me.

      Great job picking them all up on the cheap!

      Best regards.

  18. says

    Jason, Do you ever look at small companies with good growth potential that pays a 4.0% dividend. This little company was listed by Motley Fool as a top ten company to work for and after looking at them I have included their stock in my portfolio at a 3% level, since 97% is big companies like GE and others. I would be interested in your take on this little company. FHCO

    • says

      Bob,

      I looked at that company last year. Actually, I heard of the company by way of another blog: Financially Integrated. I think it’s promising, but I’m not sure if I’m a big fan of the business model. I just don’t know if I can predict how popular female condoms will be, as I’ve never actually seen anyone use one. Could be a great investment, but I’m a bit unsure about it right now.

      If I were to go into a small cap right now my preferred play is TIS.

      Cheers!

    • Ravi says

      Every large company was once small.

      I’ll give this a go. A tiny cap stock like this is tough to take a dividend growth approach to investment. The only way a tiny company can grow significantly is to keep more earnings. Payout ratio for FY2011-FY2013 (102%, 41%, and 52%). The dividend has gone from $.05/sh to $.07/sh in this time (earnings jumped in ’12-’13).

      Payout ratio is healthy – check.

      60% of the company is owned by insider/institutions (less likely to sell based on a whim).

      Earnings growth has been ~20% for the past few years. I have no idea what it will do going forward, but at this rate it’s not a bad future.

      The problem I see with this is it’s impossible to value a small cap (read: TINYYY) company based on dividends. Dividends are susceptible to earnings. In large companies, earnings just don’t swing a ton. In small companies with $200mm in sales, they sure can. I read online ~60% of sales come from one customer (World Health Organization). This is not a good sign, or it could be a great thing if they increase distribution of the product.

      It is susceptible to someone else creating a female condom (Church & Dwight – makers of Trojan) if the category takes off. They could easily be squashed, unless they have a patent on the production process or something else. This would be bad.

      They could be bought out, in which case it would be very good.

      Overall, lots of things going on. The biggest risk, in my opinion, is customer concentration. The biggest reward is a successful category or takeover by another company. Since only 1/3 of their sales are retail, you’re really betting on them getting mass distribution, keeping the WHO happy, and not being taken over.

      As a dividend growth stock, I say no go.

      As a growth stock with some dividends along the way to keep an investor happy… maybe, provided no one else learns how to make a similar product soon.

  19. donebyforty says

    Technically you’re investing in the Shinehardt Wig Company, but still. :)

    The move away from financing might reduce the risk the company is taking on as a whole. Seems like a good thing for dividend investors, right?

    • says

      DB40,

      Ahh, I had to look up that reference. I’ve never seen 30 Rock. Shame on me?

      I think the move will work out for all investors. Whether or not you think the retail lending business is a good business or not, this move allows GE to stay better diversified between segments. I think the 70% industrial/30% finance mix that management is targeting by 2015 is a pretty good target. And spin-offs tend to work out very well for shareholders over the long haul, so there’s that too. :)

      Best wishes!

  20. says

    Thanks for your comments and input. This stock is outside what i would normally invest in so I guess I could say this is a small investment for me and possibly a roll of the dice vs my other investments in solid long term dividend paying companies. My retirement is solid and this stock is for something my wife believes in so we have a small position to see what happens. Not much to win or lose in this one.

    • says

      Bob,

      Ravi broke it down for you nicely there. Thanks Ravi!

      If you feel comfortable with this investment as a gable/spec play then I say go for it. I’m certainly open minded to investing a very small portion of my portfolio on smaller, higher risk plays since my portfolio has been built on mostly blue chip stocks.

      Best of luck!

      Cheers.

    • Ravi says

      I definitely do not mean to imply it is a bad investment, only that it is not a good “dividend growth” investment. There are enough possibilities for its future to make it a big winner, and enough risks to make it a loser.

      Regardless, great things they are doing for reproductive health the world over. Maybe invest in a dividend growth stock and donate all earnings in perpetuity to Planned Parenthood, or some other charitable organization?

      Buying their stock doesn’t directly support the organization.

  21. says

    Congrats on owning GE, your watchlist and purchase have inspired me to look into this complicated company. I’m excited to watch this little snowflake grow, and GE looks like it has a lot of growth ahead of it :) I’m looking forward to your possible second purchase this month, maybe more GE? Or TIS or T from your recent post? Thanks for the content, it’s always so helpful!

    • says

      Ryan,

      Thanks! And congrats to you on your recent T and PM purchases. Very nice! :)

      I’m hoping to get another purchase in this month, It’s going to be a little tighter than I initially thought due to estimated taxes going through this month, but I think I can still eek one more out.

      I’m honestly not real sure what the second buy is going to be. BNS was high on my list but it’s popped a bit since then. GIS was one I was hoping would come down, but after that recent dividend raise I don’t know if that’s going to happen. UL is one I’m looking at right now.

      TIS remains on my list. It’s got a lot I like, but also a lot I don’t like. The risk/reward profile it more aggressive than what I’m used to, but it might not be bad to shake things up a little.

      Cheers!

    • says

      Teach Me To Invest,

      Thanks for the support!

      Yeah, I think GE may take a while to show significant capital appreciation because there’s a lot of investors out there that hate this stock. But I think it’s a great company, and I have no qualms here with management. In the meanwhile, we get an opportunity to average in and collect a nice yield. :)

      Best regards.

  22. Bill Wang says

    Hello Jason,

    regarding to the value of GE, Can you explain to me how you determine the value of it?

    Base on 8-9% growth estimation for 10 years with discount rate 10% , the current DFC module with Book Value is 26.62, without adding in book value it is around 22.8. Base on Dividend Discount model with 9-10% on last five years dividend growth, $0.82 dividend pay out and the same discount rate 10%, then it is around $80. So it is a little bit confusing and too much difference in between.

    thank you

    Bill W.

    • says

      Bill Wang,

      I can’t comment on your other valuation model, because I don’t value companies like that.

      However, the DDM analysis is quite sensitive to growth rates. So changing it by a percentage point or two can dramatically affect the valuation. That’s why I always recommend to be conservative. I used a 7% growth rate based on what S&P Capital IQ predicts, which I think should be conservatively accurate. I then averaged my price, as well as the other two based on M* and S&P, and still thought I was buying in below what could reasonably assumed to be fair value.

      Best wishes!

  23. says

    DM,

    Nice buy here. Trading at around 17 earnings, and 14 forward earnings, this blue chip definitely makes sense right now. Also, the spin off of Synchrony will act as a major buyback of stock which should also boost the share price at least in the short term. I initiated a position today at $25.62.

    Keep up the great work- I love the new home for your blog.

    Brian

    • says

      Brian,

      Nice buy there! Glad to have you as a fellow shareholder. :)

      I agree completely. The Synchrony spinoff should be a great move for shareholders. I’m really looking forward to what lies ahead for GE over the next 5-10 years. I’m happy to own a piece of this company here.

      Thanks for the support!

      Best wishes.

    • says

      thedividendway,

      Hey, glad to have you on board as a fellow shareholder. I think the next few years or so might be a golden age for GE dividend raises. They’re doing some really exciting things. I’m very happy to be a shareholder here.

      Best wishes!

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