Recent Buy

buyAt the time of writing this article, the S&P 500 is sitting just a tad above 2,000 points. This after a five-year run that has seen the index up almost 100%. Think about that: The index almost doubled itself in just five short years. Is that collection of 500 stocks now worth twice what they were in late 2009?

Warren Buffett was eternally correct in asserting that price is what you pay, while value is what you get.

And that’s especially true when investing in individual businesses. Because not only are price and value not always associated at a 1:1 ratio (they’re often not), but the price of an index tracking 500 stocks and the value of one particular business are hardly correlated.

As such, I’m sticking to my long-term plan whereby I invest excess capital generated from savings on a monthly basis into high-quality businesses that regularly and reliably pay and raise dividends. The S&P 500 could go to 4,000 points tomorrow, and it doesn’t change my plan. As long as I can still continue to find individual businesses that are fundamentally sound and attractively valued I’ll continue to allocate available capital to dividend growth stocks.

So here we go! Another addition.

I purchased 40 shares of General Electric Company (GE) on 9/4/14 for $25.91 per share.

Overview

General Electric is a diversified conglomerate with products and services that range from energy infrastructure, finance, power generation, aircraft engines, medical imaging, and household appliances.

The company operates in eight segments: GE Capital (30.2% of fiscal year 2013 revenue); Power & Water (16.9%); Aviation (15%); Healthcare (12.5%); Oil & Gas (11.6%); Appliances & Lighting (5.7%); Energy Management (5.2%); and Transportation (4%).

Approximately 47% of 2013 revenue was generated from US sales.

Fundamentals

GE has had a rough decade, both in terms of the business and the stock.

The stock had a catastrophic drop during the height of the economic crisis, as GE was heavily exposed to the financial issues that were plaguing the economy at the time. As such, shareholders saw the stock drop from ~$41 per share to ~$7 from late 2007 to early 2009. On top of that, the dividend was cut from $0.31 quarterly per share to $0.10.

While it’s no consolation to shareholders during that time, the core business has been steadily improving over the last few years. However, growth over the last decade isn’t particularly appealing.

Let’s take a look. Their fiscal year ends December 31.

Revenue shrank from $152.363 billion in FY 2004 to $145.715 billion in FY 2013. That’s a compound annual growth rate of -0.49%, as in negative.

Earnings per share paints a similar picture, as it also shrank over the last decade. EPS came in at $1.59 in FY 2004, and finished at $1.47 for 2013. That’s a CAGR of -0.87%. However, we don’t skate to where the puck has been, and similarly so we can’t invest where a business was. The last five years of EPS growth has been much more favorable, showing a CAGR of 9.3%. Meanwhile, S&P Capital IQ predicts EPS to grow at a compound annual rate of 7% over the next three years.

Dividend growth over the last decade hasn’t been particularly strong either, due to the aforementioned dividend cut. However, after cutting the dividend in 2009, the company has been committed to growing it, and has raised it six times since to the current $0.22 quarterly per share payout. I think it’s a good bet the company will continue growing the dividend from here. They specifically spell out growing the dividend as a priority, so it really all depends on business execution and the broader economy.

GE continues to send out a ton of cash to shareholders, though. They returned $18.2 billion to shareholders in 2013 alone, via dividends and buybacks. They’ve been steadily reducing their massive share count after peaking in 2010 at over 10.6 billion shares. The company aims to reduce the share count by 10% between 2012 and 2015, which I think is realistic. That would put the company at about 9.5 billion shares.

The yield on shares stands at an attractive 3.39%, with a payout ratio of 60.3%. The payout ratio is moderately high, but I think the company will continue expanding EPS to allow for the dividend to continue growing in the high single digits.

The balance sheet continues to improve, but is still heavily leveraged. GE had over $221 billion in long-term debt, as of the end of 2013, against total cash of just over $132.5 billion. So these are obviously huge numbers we’re talking about.

The long-term debt/equity ratio stood at 1.7 at the end of 2013, which is down significantly from years past. And the interest coverage ratio is 2.6, meaning the company can pay interest expenses 2.6 times over with earnings before interest and taxes.  These aren’t the type of rock solid numbers I usually look for, but GE has a lot of potential to shore the balance sheet up. All of these numbers are massive improvements on what was there just five years ago.

Profitability appears solid, though margins are still improving as well. Net margin has averaged 9.1% over the last five years. Meanwhile, return on equity has averaged 11.41% over the same time frame.

Qualitative Aspects

I usually would never touch a business with metrics that look like the above, but GE is a unique case. It’s currently a healthy and growing business that made some mistakes in the past that kind of came up and bit them. These mistakes were primarily based around relying too heavily on the finance division and exposing that division to too much risk, as well as diversifying away from what the business really is.

However, GE has been shedding off non-core businesses since the crisis, some of which were quite sizable. For instance, the company sold its NBCUniversal business to Comcast Corporation (CMCSA) in two chunks (selling off the remaining 49% in 2013 for $16.7 billion) and is in the midst of spinning off its retail financing business through an already completed IPO that resulted in an independent company: Synchrony Financial (SYF). GE floated approximately 20% of the business via an IPO, while the remaining ~80% will be spun off to shareholders in 2015 via a share swap. This spin off will allow GE to pay down debt and buy back a considerable number of shares via share reduction in the swap. Finally, they are in discussions to sell off the appliance division due to low margins, which, if completed, will help with GE’s goal of increasing their margins.

And while shedding non-core businesses, GE has focused on the industrial side of the house. They are acquiring the power and grid businesses of French company Alstom S.A. for $17 billion after a very public battle, and expanding their footprint across energy, infrastructure, and aviation. Their backlog has been steadily rising over the last year, and it stood at a whopping $246 billion at the end of the second quarter. I believe that represents strong demand for GE’s solutions and a healthier worldwide economy. That should continue to keep them busy in their core competencies.

GE is making big bets on infrastructure, citing a need for $60 trillion in worldwide infrastructure investment by 2030. They continue to position themselves well with product offerings in energy management, power generation, and transportation. They are growing in areas where energy is abundant, but getting it to people is hampered by insufficient infrastructure, technology, and investment. They cite 30% annual growth in areas like Africa due to this.

They have wide product diversification, breadth, and scale that is unmatched. It’s not like any ol’ business can just start cranking out jet engines, locomotives, gas turbines, and deepwater drilling systems.

This gives them inherent competitive advantages, but execution will determine how much GE grows from here. But I do believe management is making the right moves by jettisoning businesses that aren’t part of GE’s core industrial competency and focusing on businesses that are. Redeploying assets, personnel, focus, and capital takes time in a ~$260 billion company, but I think the foundation has been laid for a very successful future.

Risks

Many of their businesses are cyclical, which can lead to erratic financial metrics. Furthermore, they still have significant exposure to the financial sector via GE Financial. That carries regulatory and financial risk. In addition, many of the businesses and markets that GE competes in are extremely competitive. Finally, there are larger macroeconomic risks, as many of GE’s projects are quite large and require significant broader economic growth.

Valuation

GE shares trade hands at a price-to-earnings ratio of 17.76, which is higher than its five-year average of 15.9. However, the last five years have been clouded somewhat by both a rising stock market and internal business changes. Going back even further, it appears GE shares would often trade at P/E ratios of 20 or above, which may reoccur as the business improves.

I valued shares using a dividend discount model analysis with a 10% discount rate and a 7% long-term growth rate. I think GE can grow the dividend at this level, provided earnings grow in likewise fashion, which will require proper execution. Furthermore, this rate is below the growth rate in EPS and the dividend over the last five years, while in line with the predicted growth rate looking out over the foreseeable future. The DDM analysis gives me a fair value on shares of $31.39. I believe that allows for a margin of safety, since shares are trading about 20% lower than this.

Conclusion

GE has scale, breadth, and diversification that is pretty much unrivaled. They have been making great strides to improve the business by focusing on the core industrial segments, jettisoning businesses that take away from their competencies and can potentially do more harm than good. The balance sheet and margins have both been steadily improving, while earnings and the dividend have been growing at robust rates since the depths of the financial crisis. Energy, infrastructure, and transportation are all big plays on a growing economy across the globe, and GE’s massive backlog proves that they’re making the right moves here.

This purchase adds $35.20 to my annual dividend income based on the current quarterly payout of $0.22 per share.

My portfolio still holds 49 positions, 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 3/5 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 $27.00.

I’ll update my Freedom Fund in early October to reflect this recent purchase.

Full Disclosure: Long GE.

What are your thoughts? Think GE is a buy here? 

Thanks for reading.

Photo Credit: Stuart Miles/FreeDigitalPhotos.net

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112 Comments

  1. Henry,

    Yeah, I don’t bother timing anything. If I see a stock that is potentially 20% undervalued and capital comes my way, I’m likely to purchase, assuming I have room in the portfolio for it. I tend to get paid either right at the end of the month or right at the beginning, so I generally base my purchases around that, but it really all depends on what I see and where my research leads me.

    Thanks for stopping by!

    Best regards.

  2. Hi DM,

    You mention value and price. As a dividend growth investor how much do place on value over the dividend growth side, bearing in mind you would like to hold forever i.e. with GE would you have bought it at say $32, a little over your intrinsic valuation?

    Kind regards

    Louis Gunn

  3. Great buy! That is one of my more recent purchases =) I have been building my existing positions and am strongly considering adding additional funds to GE.

    You’ve been chugging right along =)

    Take care!

  4. Thanks for sharing your thoughts on GE. Since I’m a fairly defensive investor I tend to stay away from any stock that has had a catastrophic collapse in stock price. It’s good to hear GE is diversifying and making changes to ensure that won’t happen again. Best of luck!

    CD

  5. Great buy Jason…we also recently picked up GE. Great company at a great price. GE has paid a dividend to shareholders for over 100 years (since 1899). Definitely a company we plan to hang onto well into retirement!

    Keep up the great work. Wishing you continued success in your journey! AFFJ

  6. Hi Jason! Thanks for the insightful review of GE, I dont know if you remember me but I once asked your opinion about averaging down and you helped me a lot about how to deal with a stock thats declining in value right after purchase, I just average down. Now I’m hoping that my stocks can go down some more so I can keep on averaging down and I thank you very much for the enlightenment. Now for my next question, how do u deal when your stocks go up in prices? I know you made lots of purchases of PM and now GE and a higher entry point that you previously purchased them. Im having a hard time pulling the trigger when the stocks goes higher than my entry point. How do you deal with this circumstances?
    Keep rocking DM!
    -Christian

  7. Jason,

    Congrats on the purchase and thanks for the wonderful analysis, it was a great read. I’ve recently been convinced that GE isn’t the same company that bit off more than it can chew. I’m almost positive I’ll be initiating a position soon. You had a killer August and I can’t think of a better way to start September than adding to your passive income.

    Best,
    Ryan

  8. Hi Jason,
    Why don’t you buy more shares of Vodafone ?
    It’s your only investment which you can buy now more cheaper and so, increase your yield.
    Cheers,
    Eric

  9. Pingback: GENERAL ELECTRIC | Dividendo
  10. GE is a great pick anywhere around $25 plus or minus. We have discussed how great the future of GE looks now that media and financial businesses have largely been divested from the company. Look forward to more GE jet engines back orders of locomotives and other amazing commercial and industrial products this mammoth company produces. Thanks for sharing your recent buy!

  11. What do you think about Gazprom? Pays a dividend of 5%, trades at 2.5 times earnings, and has big proven gas fields.

  12. GE was on my short list of buy in May (with PG*, UTC and VZ*) and I was mentioning “will be a good buy opportunity at 25.75$”. The price fall down by near 10% in August – bigger than the 5% estimated – and I did not purchased any stock, my US money was already spent.

    I think it is not a bad buy – will have been better at 24.5$ but its recent 13% swing worry me a little bit. I know that UTX – biggest aerospace competitor – to GE also fall by 15%.

    Past dividend increase is not a guarantee of any thing, mainly in the type of business they are involved. GE capital is not making as much as when the interest rate were high, aerospace business is not growing really fast and GE through SNECMA is not getting a big share of the motorizations of the Airbus A320neo.

    I consider GE as being a 15-15-20 (total dividend paid, total dividend growth, total stock growth for the next five years). I’m looking right now for 15-25-20 investment.

    Will continue to monitor it.

  13. Good pickup here Jason. I’ve been looking at adding to my GE position and there is an outside chance that I should be able to do that this month. I’m looking forward to the next six months as I’ll have some capital to put into my non-Loyal3 portfolio and will be rolling over my 401(k) from a job I just left into my IRA. Nothing like some fresh capital to further the dream of passive income.

  14. Jason:

    I’ve been thinking seriously about adding some GE myself. It’s about 3% of our div portfolio and I’m looking at taking it up to 5%.

    It’s hardly an exciting stock but does seem that it has returned to being a steady eddie, which is what I’m looking for these days. It lost its status as a Dividend Champion because of dividend cuts, but many believe it will work its way back into the hearts of DG investors.

    M* and S&P giving a fair value above current price is a plus these days in that finding screaming bargains seems impossible. The Fast Graph also shows it at fair value with estimated earnings growth of 8.5%. The payout ratio looks reasonable and a dividend hike is due in December. All things considered, GE appears worthy of an additional buy. Ok…. you talked me into it. 🙂

    Steve

  15. Great buy. I like how GE has returned to its true side, and not tried to become a services company that also does technology. Alstrom is also a rail manufacturer – much of the rolling stock of DC’s Metro is was made by them. I think that GE is like’s the power side, especially considering they have wind and other newer sources of power production. Yet, what GE really likes the rail side of Alstrom. Rail is constantly increasing taking a larger share of overland of freight and in other countries passengers. GE is really thinking globally with that purchase.

    – Gremlin

  16. Hey Jason!

    I just bought iGE this morning. Took a small position to see how it goes. Nice to be co-owners of another stock with you!

    Here is to the best for both of us!

    Ray

  17. I’ve been looking at GE for a long time and always considered it a solid company. I almost invested in it before the recession but luckily I didn’t, but I’m kicking myself for not getting in when it sank to single digits. There was no way that GE was going bankrupt right? I’m not a big dividend guy but dividends are cool and I also see some growth in the stock with their business in clean energy and technology.

  18. I agree with most of your analysis above. However, I don’t think its a buy *because* of their current position.
    Their debt is too high at the moment, with their debt being higher than their annual revenue I cant call it a steal. Their earnings are not reliable due to the natural business cycle which makes their payout ratio scary. (I don’t believe they can continue increasing dividends long term as the company sits right now)
    Their Net income is increasing but their Top Line Growth is not. I would like to see their annual revenue AND net income increase after they sell off their non essential assets and clean up some of their long term debt.

  19. DM,
    Nice pickup, GE currently a big holding of mine. Picked up BP on the pullback, looking @ adding DE, MCD on further pullbacks. It’s nice to have some dry powder when value shows up! MCD looks ok right here, but waiting on DE.

    All the best,

  20. Good purchase. GE has been on the short list for me lately but I haven’t pulled the plug yet. I just added AAPL yesterday on the recent dip. I bought some shared right after the split and doubled up yesterday. I really think it has some potential on continued dividend growth.

  21. Good purchase, we own GE as well and may add to our existing position. GE has hit a few rough patches over the years but it’s still a strong company overall.

  22. Louis Gunn,

    Great question!

    A margin of safety is used to reduce risk, especially in the short term. I don’t mind paying fair price for a great company, but I think it’s generally unwise to pay more than fair price, especially if there are other attractively priced stocks. Remember, every stock investment competes with every other available stock in the universe. So paying more than fair price for a business means you have no other opportunities out there, which is unlikely.

    I’m investing for the long term, so a couple percentage point swing doesn’t really matter much when looking at it through that lens, but I’m also after reducing risk as much as possible. Not losing money is my primary directive, and to that end I look for the largest margins of safety I can find, generally speaking.

    I hope that helps!

    Cheers.

  23. ILG,

    Glad we’re on the same page here! 🙂

    I think GE will be a great investment over the long haul, but short-term volatility may still be present, especially as the business is still changing.

    Thanks for stopping by.

    Best regards.

  24. Captain,

    GE is definitely not for everyone.

    However, I don’t mind a catastrophic collapse in a stock price. That would present tremendous opportunity (like BP) if the fundamentals still look good for the long term. Investors who bought GE at its lows are being handsomely rewarded.

    The problem is when there is a catastrophic collapse in the business. Now, that’s an issue and generally would prompt a sale for me, even at a loss.

    Take care!

  25. AFFJ,

    Gotta love companies with dividend records dating back to the 19th century! 🙂

    Appreciate the support. And glad to be a shareholder with you in this fine industrial conglomerate.

    Best wishes.

  26. Yep! Agree. I am not in any particular hurry to add to one position over the other right now. Fortunately, I think the business is heading in a better direction now that they are in the works of spinning off the financial arm.

    Take care!

  27. Ryan,

    I do love starting off a month with adding a little snow to the snowball. Puts me in a great mood! 🙂

    GE is definitely turning things around. Even just comparing the company to its 2009 version and you see a very different business here.

    Keep up the great work over there!

    Cheers.

  28. Eric74,

    My cost basis in VOD is artificially high due to the sale of the Verizon Wireless assets. It’s actually trading substantially above where I bought it at. And I never intended for VOD to be a large position anyhow. I just couldn’t pass up buying when it was in the mid $20s pre-consolidation. I am thinking of adding to my US telecom holdings (T and VZ), but neither is a real steal right now.

    I hope that helps.

    Take care!

  29. David,

    Glad to have you aboard! 🙂

    I put my money where my mouth is. If I didn’t think GE can make us money and pay us more dividends for the next decade and beyond I wouldn’t have invested in the company. But there is always risk, and it’s always a gamble. I hope my predictions are correct.

    Thanks for stopping by.

    Best regards!

  30. DivHut,

    Well, they still have substantial exposure to finance through GE Financial. But their target of keeping it less than 1/3 of the business is more or less on track. But the media exposure is gone now, which I think is good only because it allows them to focus on their core competencies. That was an example of diworsification, in my opinion. NBCUniversal looks to have been a great asset in the wrong company.

    I’m looking forward to GE pumping out more products and fulfilling some of their orders. That backlog is impressive. 🙂

    Cheers!

  31. Fedde de Jong,

    That’s a risky play, my friend. Take a look at Russia’s history with nationalization and you’ll see what I mean. I’m taking on enough risk through my investment in BP since they have a 20% stake in Rosneft. If you’re looking for Russian exposure with less risk I would recommend BP.

    I wouldn’t want to be a part of another Yukos.

    Take care.

  32. Hemgi,

    Well, cheaper is always better. It would have been even better to buy GE at $15 or $10. But we can’t invest in what was, but what is yet to be.

    GE may not grow as fast as I predict, but I think 7% is realistic. GE Capital won’t be making as much money not only due to lower interest rates, but also because the business is shrinking. Whether or not the redeployment of capital and personnel to industrial assets will allow that 7% or not remains to be seen.

    But I think UTX is another great company. I actually just analyzed them the other day for DTA and I do hope to initiate a stake at some point. Not just for their aerospace assets through Pratt & Whitney, but for the rest of the business. Looks very solid.

    Thanks for stopping by and sharing! I guess we’ll see what happens with GE here.

    Best regards!

  33. W2R,

    Awesome, bud! I’m happy for you. Good things all around. 🙂

    I hope we get some cheaper stock prices soon, which would allow that capital of yours to be stretched a little further. We shall see!

    Take care.

  34. Steve,

    I was in the same position as you, with GE being a smaller part of my portfolio. It’s now right about where I’d like it to be for now.

    I do think it’ll eventually reclaim its Dividend Champion status. I don’t expect huge dividend increases, but high single digits is probably reasonable and realistic. And that puts us on pace for 10% or so returns, which I’m more than happy with.

    I do hope 8.5% growth is what they achieve, as that would be above what I predicted. That would allow for solid dividend raises while also lowering the payout ratio a bit.

    Glad to have you as a fellow shareholder! 🙂

    Take care.

  35. Nice that you could pull the trigger. You bought GE, I decided to put my money in Verizon, I see more long term advantages there, the yield is higher and the debt more sustainable as they derive on a stream of massive passive income.

    You wrote some nice reasons to buy GE though, gonna take a look into it to buy it next month or the month after… don’t have the amounts of cash to invest 1500 dollar chunks every month.

    Cheers to the weekend!

  36. Gremlin,

    Absolutely. And this is a way to diversify your energy exposure. If clean energy takes off in the short term and causes lack of demand for oil/gas, I have the exposure to GE which manufactures the turbines and windmills. It’s all about diversifying and reducing risk. 🙂

    GE is a monster. They’re not going anywhere, and reducing their financial exposure reduces the chances of such. Glad to be a shareholder!

    Thanks for stopping by.

    Best wishes.

  37. DGJ,

    Being flat over the last few months is an opportunity to add more, which is what I did. 🙂

    It’s trading almost exactly where it was when I last added to it in the spring. I love it!

    Glad to be a fellow shareholder. Thanks for stopping by.

    Cheers.

  38. Ray,

    To the best for both of us, indeed. 🙂

    Glad to be a fellow co-owner with you. I think GE will do well for us over the long haul. It won’t provide for explosive growth, but I predict slow, steady growth with annual raises in the high single digits. And that should be enough for 8-10% annual returns.

    Best wishes!

  39. Andrew,

    Yeah, that was a tough spot there. GE cut the dividend, so that would have probably limited my interest until they raised it again. Hard to say exactly what I would have done without actually living through it. But certainly investors who bit the bullet and walked into the fire are glad about it today. 🙂

    Thanks for stopping by!

    Take care.

  40. Wisp,

    I do hope you’re able to sneak in a buy this month, but if there were ever a time to be light on capital it’s probably right now when there isn’t a plethora of bargains out there.

    Hope all is well!

    Best wishes.

  41. Jason,

    That’s a fair assessment. GE isn’t for everyone, and that’s what makes it a market. 🙂

    However, the time to buy stocks is before everything looks wonderful and rosy. When everything is great stocks are generally expensive. GE’s top line will grow again after the business gets completely realigned, and by then the multiple may expand back to where it historically was. I’d rather buy now and collect the rising dividend income. But we’ll see how it turns out. If I’m wrong and the dividend gets cut on the back of deteriorating fundamentals then I’ll lose money, but GE isn’t a major position for me. But I think earnings and the dividend grow in the high single digits from here.

    Cheers!

  42. j-harr,

    Nice buy there on BP. I really thought about adding more yesterday, but it was still above my cost basis. And I think BP still has tremendous risk with Russia. The ruling isn’t all that catastrophic, as they could take that whole penalty on in the form of debt and keep right on chugging. But the can will kick down the road anyway.

    I do hope MCD turns it around. Fundamentals over the last few years haven’t been particularly good, but they have all the tools to succeed. I’ve laid out my ideas on the company many times, so I guess we’ll see what happens.

    Best regards!

  43. Agent Dividend,

    I thought about AAPL quite a bit before the split and dividend increase and still passed. I decided that I can’t reasonably predict consumer demand for iProducts over the next 10 years, and that landscape changes way too fast for me. Locomotives, on the other hand, haven’t changed too much over the last 100 years. 🙂

    But Apple could be a fantastic investment here. I would have done well to get in when I thought about it, as they’re up quite a bit from there. We’ll see. I may invest in the company at some point, but I just don’t have a good gut feeling about it right now.

    Wishing you the best with it, though! 🙂

    Best wishes.

  44. Tawcan,

    GE’s stock has been really weak over the last year, which has allowed me to giddily build a position near the same cost basis. Meanwhile, the company continues to improve. I like the look of things!

    Glad to be a fellow shareholder. I do think we’ll be glad to own GE when looking back on this time 10 years from now. 🙂

    Thanks for stopping by!

    Best regards.

  45. DDI,

    I actually strongly looked at VZ before buying GE, as VZ was my #2 stock on this month’s watch list. I just didn’t feel a margin of safety is there, however. I think it’s probably pretty close to fairly valued, but it all depends on how much they can grow. I think the dividend increases will remain in the 4% range or so, which when combined with the ~4.5% yield means you’re looking at 8.5% total returns, assuming a static valuation. Nothing wrong with that, especially considering the higher yield and the time value of money. But I thought GE could provide me more dividend income over the next 10-20 years, and has more growth opportunities as they operate on a global scale, versus VZ’s US business. I’m a shareholder in VZ, and plan to add at some point. But I’m not quite sure the price right now is particularly advantageous. It’s trading above Morningstar’s fair value and the FV I calculated as well. But we’ll see!

    Cheers to the weekend, indeed. Thanks for stopping by. 🙂

    Best regards.

  46. What’s your thoughts on DE under $83. Do we see more selling pressure. Fundamentals have changed as far as earning in the short term???? Looks like solid value play, any thoughts.

    Thanks,

  47. Have you been able to add capital to your portfolio from your online income or is this a reinvestment of dividends?

  48. GE was one of the first stocks I bought, and it’s still in my portfolio (though I’m going to have to sell and re-buy in a better tax advantaged account). Love it — recently went on a tour of their innovation centre herein in Calgary, AB and it was amazing. I’m a huge fan of this company and their stock. Great buy!

    PS. congrats on your Plutus award nomination!!!

  49. j-harr22,

    Well, I bought DE at a higher price than that, so I obviously like it quite a bit at $83! 🙂

    I don’t want to go too crazy with DE, however. I don’t intend for it to be a larger position, hoping to keep it at 2% or perhaps slightly less over the long haul. As such, I’m holding here. But if it breaks below $80 I’ll probably add more, depending on capital.

    If I weren’t already a shareholder, though, I’d buy here. That’s assuming a long-term horizon that isn’t swayed by short-term fluctuations.

    Cheers!

  50. Jake,

    Good question.

    Both. I deposited funds into my brokerage account which were combined with the dividends that were already sitting there, and those combined sources of capital were used to buy these shares. I’m trying to save as much as possible, though my earning power has declined significantly since moving to writing full-time. But I think I can continue to save at least $1,000 per month, which, when combined with dividends, allows for at least one stock purchase per month.

    I hope that helps.

    Best regards.

  51. A-G,

    Glad to be a fellow co-owner! 🙂

    I’m with you. I don’t anticipate GE ever going out of business, and reducing risk via the jettisoning of some of their capital and media businesses further cements their future.

    Thanks for stopping by!

    Take care.

  52. Bridget,

    Thank you! I really appreciate that. It’s a big honor for me. I honestly had no idea I was even nominated. I found out about it via a tweet that came across my email. Really humbled by it. Means a lot to me, as it just goes to show others appreciate my hard work. 🙂

    I’ve never been able to tour any of their facilities. I’m jealous of you! I’d love to do something like that one day.

    Glad to be a shareholder with you, as it sounds like you’re in it for the long haul. The more of us, the better.

    Best wishes.

  53. It looks like the Great Recession shook out all the bad aspects of GE. It’s good to see an old lion roar. If I remember correctly, they were once the most admired company in America. I’m sure they’ll get that title back in due time, especially now that all of the shenanigans are in the rear view mirror.

  54. You should post links to articles you write elsewhere. I would like to read your UTX analysis and I can’t be the only one. That would drive traffic to your articles which would drive money to your pocket (hopefully).

  55. The first stock I ever bought was GE at 33.55 on 2/22/08. When that stock tanked, it discouraged me from investing for a long time. I sold it for 19.35 5/2012. That’s when I started to get back into this again and wanted to cut ties with the company that lost me a good deal of dough. This blog has done a great deal to get me motivated to invest. Thanks! Too bad you weren’t around during the collapse to advise me to buy more shares.

  56. Spoonman,

    I think they’ve made great strides to get back to where they once were. I’ll admire them as long as they send more and more dividends to my account. 🙂

    But it is good to see an American icon get back to what they do best. And they’ve turned things around pretty dramatically over the last five years. I think one has to appreciate all of that considering how big and complicated this business is. But we’ll see what they’ve still got left in the tank.

    Thanks for stopping by!

    Best wishes.

  57. blahblah903,

    I actually do post links. Usually, you can see these links in my “Weekend Reading” articles. I also tweet these articles on my Twitter account.

    I have a WR post that I’m working on for tomorrow, where you’ll see some of my other writings. 🙂

    Cheers!

  58. blahblah903,

    That was a tough time for GE shareholders. Not only did you have a falling stock price, but the fundamentals were deteriorating badly. And then the dividend was cut. I’m usually more than happy to buy when a stock’s price falls, but only when the fundamentals remain sound. I would have been hard pressed to buy more GE during that time, and I don’t even know if I would have held. Buying at the depths sure would have been profitable, but I most likely wouldn’t have.

    The only experience I can relate that too for me is what I experienced with Telefonica. I sold for a small loss because of deteriorating fundamentals and what I thought was an unsustainable dividend. They cut the dividend a couple days after I sold, after repeating how safe it was (similar to GE). I lost a little, but I learned not to chase yield (which I was doing with TEF).

    Unfortunately, losses sometimes occur. The best we can do is learn and grow as investors.

    Cheers!

  59. That’s good to hear. $1,000/month of fresh capital will definitely give you dividend income a boost. Thanks for sharing.

  60. Good choice; I’m bullish on GE myself, but I already have a full position. For me this month, it was MCD, PG, and PM. I’m sure we’ll both love our choices in 10-20 years!

  61. DM,

    Nice buy. They just announced another dividend I saw. Do you think if they would have given us shares of SYF it would be worth keeping? I read they may pay a dividend in the future like a year from now. I read a similar rumor on the KMB spinoff of Halyard Health as well.

  62. I’m looking at adding some more EMR to my portfolio to bump the position up a bit. My GE position is almost twice my EMR position and it looks like EMR could be poised for some strong dividend growth. Although I can’t blame you for adding some GE. They have their hands in almost everything so even though a lot of their business is cyclical, barring catastrophic economic times they aren’t on the same cycle. That leads to lower growth in the good times but less decline in the bad.

  63. Nice addition to your portfolio, Jason. GE is reshaping itself and focussing on their core competencies. That’s a good foundation for future success.
    I’ have been watching HSY lately. It’s trading hands near 52 week low. I would like to jump in since I believe it is a wonderful company and it shares it’s success with shareholder through repurchases and a nicely growing dividend. Only P/E is slightly high for my taste. Could you share your view on HSY?

    Enjoy your weekend.

  64. Nice buy for the long term!!

    I personally own an equal weight average position in my account. I also bought a decent block of GE shares as a side investment a little bit ago(at a higher cost basis than current), so adding more is out of the question.

    I bought a new “weighted block” of BP this week for my long term retirement account though. With plans to “suck it up” and hold for a very long time, or to sell if the share price comes back up to a much higher value(ie: the earnings yield drops). That will leave me with my core position to compound. This is also just part of a small side project I do when things look interesting…

    And… I bought some more Nestle this week as well. That’s always a position worth adding to IMO.

    Keep up the good work DM!!

    Lou

  65. hi again mr dividened mantra
    if I ever feel deflated I just read your blog!
    one share in my portfolio here in the uk has cut its dividened by 75% and the share price is falling fast the buisenss a supermarket is massive here in the uk. ive held its shares for 15 years and its regulary paid its dividened. so this year I increased my holding now im loosing money! it could recover and come back massive or It could be bad long term investment and years before divs start up again or I could loose most/all my capital . what would you do if this happenened to one of your stocks?

  66. Hello Jason,

    I like your Website and I like reading your articles. Keep up the good work. I own shares in GE as well and believe they will keep increasing their dividend.

    Would you consider buying shares in BP with a dividend yield at 5.03%? I know this investment might sound a bit risky especially now that they’re facing an $18 billion fine because of the oil spill that happened in 2010. The stock went down this week because of the bad news. BP has $27B of cash on its balance sheet. It has been paying a dividend for the last 4 years and increasing its dividend. The company is profitable even after what happened in 2010. I was wondering what is your opinion on BP and on companies paying high dividend yields but facing big problems. Thank you!

    Dave

  67. Dave,

    That’s a good thought there.

    However, I have 49 other positions I have to manage. I like DE quite a bit, and that’s where my capital went over the last two months. But I never intended for Deere to be a big position for me, and I feel comfortable at 1.5% or so here. If it drops down further to, say, $80 or below, then I’ll probably feel compelled to add more.

    If I didn’t already own a little DE I’d be all over it right now, personally. And I’m not done with it. Just taking a break.

    Cheers!

  68. DD,

    Absolutely. I doubt either of us will be unhappy 10-20 years from now. If PM even lives up to half of my expectations I’ll be happy. People are worried about e-cigs, but that’s a whole new growth avenue that didn’t even exist a decade ago. Pretty exciting stuff!

    Best regards.

  69. Seraph,

    I’m with you, bud. I also plan to hold for the rest of my life. That should bode well for us, as I think GE will become a great company once again.

    Thanks for stopping by!

    Cheers.

  70. SWAN,

    Thanks!

    Yeah, I’m excited to see what the dividend raise looks like in December. I figure probably $0.015. That would be in line with my expectations and forecast.

    I have no idea if SYF will ever pay a dividend. Anything you might read on that outside of GE/Synchrony press releases is simply noise, trying to fill pages and capture eyeballs.

    As far as SYF shares go, I don’t plan on swapping my GE shares for SYF. In my opinion, the whole investment thesis for GE is based around their industrial operations, global infrastructure needs/investment, backlog, and reduction of reliance on GE Capital. To trade all that for their former retail credit operations wouldn’t make any sense at all. That’s just my $0.02 on it. 🙂

    I guess we’ll see. Either way, I think it’s all pretty exciting.

    Thanks for stopping by!

    Take care.

  71. JC,

    EMR is another great industrial company. I really love that sector, which is why I have so much exposure there. EMR is now a slightly smaller position than GE after this recent purchase, so I’ll probably have to add to EMR at some point. EMR has a lengthy history of excellence, which speaks to the quality of its businesses.

    Glad to have you on board as a fellow shareholder in these companies! 🙂

    Best wishes.

  72. scott,

    That was short for weekend reading, as I post regular “Weekend Reading” articles.

    I’m assuming you’re referring to a comment I made above.

    I hope that helps!

    Cheers.

  73. Jos,

    I’ve never actually taken a good look at Hershey, to be totally honest with you.

    I just took a cursory glance at the company right now. Obviously easily understood business model. And you have to imagine chocolate is going to be around for many more years. The stock itself appears to be more or less fairly valued. Taking a look at their recent history shows a stock that usually trades with a slightly high P/E ratio. If you’re looking for ~10% annual returns here, you’d have to assume ~8% dividend growth, assuming a static valuation. Can they achieve that? Probably so. Although, they have a slightly high payout ratio for such a low yield. Generally speaking, most of the stocks I follow with ~2.4% yields have yields that low because the payout ratio is quite low and dividend growth is fairly high. That doesn’t appear to be the case with Hershey.

    I don’t think HSY is a steal here. But the business model is obviously solid. I wish the payout ratio were quite a bit lower, which would ensure high dividend growth moving forward.

    I hope that helps!

    Cheers.

  74. Lou,

    Thanks! Glad to have you on board here. 🙂

    Nestle is a great pick. I hope to own a chunk of that company at some point. Not particularly enamored with the annual dividend and Swiss withholding, but I do love their portfolio. Of course, one does have to be concerned about general headwinds against them in terms of food trends. But they’ve got a really great stable of products.

    Thanks for stopping by and sharing!

    Best regards.

  75. Dawn,

    Thanks for the kind words! I’m glad the blog inspires you when you’re feeling deflated. There’s so much to be excited about. 🙂

    I don’t know if you’re talking about Tesco there. I hear they’re having some difficulties over there. A dividend cut is generally a sign for me to sell, and I’m almost always going to sell after the dividend has been cut. The business could very well bounce back, but this strategy is based around generating rising income. Income loss is obviously moving in the wrong direction. So I’d look to allocate that capital elsewhere where I know I can immediately increase my income and reasonably expect more in the future.

    It’s tough in these situations. Because a dividend cut usually comes after the stock has already taken a hit. So you’re locking in a loss. But losses are inevitable. We can’t win them all. And that’s why we diversify. If this retailer is only 2-4% of your portfolio then the loss won’t impact you that much.

    Furthermore, it’s always prudent (and virtually necessary) to monitor our stakes in companies for negative changes in the fundamentals. A dividend cut is usually a lagging indicator of poor business, so while it’s difficult to stay ahead of the curve, it’s much better if you can.

    I’d cut it loose and move on. I’ve done so with other positions that I felt couldn’t continue raising the dividend (TEF) or held the dividend static even when they had the income to raise it (INTC). And I never looked back.

    Best wishes!

  76. David C,

    I’m a shareholder in BP, although I bought my shares at less than where they’re currently priced. The recent judgement has been appealed, and I’m willing to bet they kick the can down the road for years to come. I highly doubt they’ll end up paying anywhere near $18 billion, although if they do they can afford it. I would consider adding to my position if it drops near $40, which would be a little below my cost basis.

    However, I think it’s a considerably risky investment, even without the ongoing litigation. Their heavy exposure to Russia via Rosneft is much riskier than one would think, if you look at Russia’s history with dealing with oil companies and foreign investment. And this isn’t even speaking of normal risks with oil companies. It’s definitely a higher risk/reward play than, say, Exxon. But I think the potential rewards with BP outweigh the risks, which is why I invested in the low $40s.

    Best wishes.

  77. It’s nice to learn something new about the company I work for – I didn’t know the revenue split of the segments!

    I liked your comment “GE is definitely not for everyone” as that applies to both investors and employees alike haha!

    For what it’s worth, great buy – things look good at the moment.

  78. Hi Jason,

    First: Yes I think GE is a buy. It’s a great company and I do not believe it is going south for a number of reasons, many of which as stated in your analysis. There’s a little concern over their high Beta, long term debt, but their PE ratio is OK.

    Second: I am a shareholder of Southland Bancshares ( SBSI). The dividend payout is unbelievable; splits 21/20 year after year and pays $.88 annually. The slow but sure rise of the stock dividends and splits reflects that this company puts its shareholders first.

    I am concerned with the recent selloff seemingly triggered by two insiders selling off 7,000 shares total. I know that SBSI has an upcoming acquisition with OmniAmerican. I see this selloff in recent SBSI shares as possibly some insider trepidation regarding the upcoming merger. I liken this phenomenon to the mistake made by Huntington Bancshares (HBAN) when they bought Skyfall Financial in 2007 and Huntington (HBAN) still has not recovered from that.

    I still love SBSI but am feeling leary about the upcoming merger. What are your thoughts?

    I am also tempted to buy HBAN feeling that the worst is over and the best is yet to come. They have increased their dividend 5-fold since 2009. Your thoughts on that?

    I am not an investment advisor either. I am just another dividend lover likeminded as you.

    I am on your mailing list and a reader of your blog.
    Thanks,
    Dan Ross.

  79. weenie,

    Haha. I can imagine not every employee enjoys working for GE. But that can probably be said for just about any company out there. But you gotta do what you gotta do.

    Thanks for the support. Means a lot from someone on the inside. 🙂

    Appreciate you stopping by.

    Cheers!

  80. Dan,

    Thanks for taking the time to comment. And I appreciate your support and readership very much!

    As far as Southside Bancshares goes, I’m a shareholder. And I’ve been so for some time now. I actually wrote about SBSI (and the merger) not long ago here:

    https://www.dividendmantra.com/2014/05/two-stocks-on-my-watch-list-for-june-2014/

    That information is still relevant.

    As far as the recent insider sales go, I don’t really pay much attention to that. There is insider buying and selling all the time with companies, usually as part of compensation plans. To worry about a stock every time a director sells shares would mean we would never get any sleep. I can’t speak for insider trepidation, but I personally don’t have any.

    Meanwhile, the stock may be down 7% over the last trading week. But it’s up almost 10% over the last month. And up over 22% YTD. I would recommend broadening your perspective. When you invest in a company, are you looking at weekly charts or 10-year fundamentals?

    I wish I would have bought more SBSI when I wrote about it back in the summer, but it’s still a really small bank. And there is risk with the merger. So I just didn’t feel comfortable there. But it has a lengthy history of success. There is some trust one is putting in management with all of this, but they have given me no reason to distrust them up until this point, so I see no reason to be concerned. I would assume they know how to run their bank better than I do. And I would assume they wouldn’t have started down the path of the merger if it was going to ruin the bank.

    I hope that helps. I hope that doesn’t come across as harsh or anything. But to worry about one week of performance when the bank has done well over extremely long periods of time is short sighted. You can do better than that. 🙂

    Best wishes!

  81. Eric,

    Nice! Glad to be on board with you here. I can see why some don’t like GE, but I think they have a great business and I anticipate many years of dividend growth ahead. 🙂

    Thanks for stopping by.

    Cheers!

  82. Hi again. I agree about insider selling. I just paralleled it with my experience with HBAN. HBAN was a winner for me over many years; then boom, they bought SkyFall and fell. Thanks for your response. I appreciate it and it did not come off as harsh. I asked a question and got a good answer. Dan

  83. Jason,
    Thanks for taking the time to looking into HSY and commenting. It’s much appreciated.
    I agree that it would more comfortable with a pay-out ratio well below 50%. Maybe I’ll initiate a small position in September and see where it goes from there, maybe not. My September purchase is not decided yet.
    I think I will prosper more buying their stock than I will buying their chocolates anyhow 🙂

    Cheers.

  84. Jos,

    Hahaha! I agree that you would probably do better to buy their stock than their chocolate. But if you end up as a shareholder that will give you extra incentive to indulge every once in a while. Best of both worlds. 🙂

    Cheers.

  85. GE was one of the first stocks I bought, back when I barely knew what I was doing (low p/e + has dividend was basically the thought process. Could have been a lot worse.) Glad to see the spin-off is a share exchange; I don’t really want to own Synchrony.

  86. Justin,

    Funnily enough, GE was the first stock I ever bought. However, I promptly sold shortly thereafter to study investing, and learn exactly what the hell I was doing. Of course, I would have done just fine holding, as I paid around $15 or so per share back then. But I remember feeling that things had kind of come “full circle” a bit when I initiated a position in GE not too long ago. 🙂

    You’re right. Could have done a lot worse!!

    I’m with you on Synchrony. Shareholders might generate more wealth by receiving shares in SYF directly and then selling them off if they don’t want them, but that’s not very tax efficient. This will allow you to still participate in the transaction by keeping your GE shares, which should eventually perform quite well due to the buybacks and additional capital to pay down debt.

    Best regards.

  87. Hi Jason,

    Nice pick up. I missed my opportunity to buy GE when it when down to the low 25’s. Instead I picked up MCD. Now MCD is continuing to slide so I think I may buy more. Does Scottrade’s commission fees bother you? Did you ever consider switching to cheaper broker?

    Thanks
    Frank

  88. Frank,

    I think MCD will be fine, but they have some fundamental issues. I hope they get to the bottom of it.

    Scottrade’s fees don’t bother me. I don’t trade much, so I’m spending $7-$14 per month for the most part. I could find something cheaper, but I like knowing that if I have a problem I can visit a local branch and actually talk to someone. And they have been around for quite a while with no issues. I plan on diversifying brokerages at some point here fairly soon, so I’m still considering my options.

    Besides, I’ll likely have very little to pay in regards to commission fees once I’m living off of my dividend income. Maybe an occasional buy or sell, but that might be it.

    Cheers!

  89. Nice buy, GE is a great company poised to rebound. I have some shares myself.

    I am keeping an eye out for BP and MCD, both appear to be trading at attractive valuations. As for MCD, I do think it will slip into the 80’s, which may be when I pull the trigger.

    It is always great to have more dividend income, keep on building gradually.

  90. Winston,

    Glad to be a fellow shareholder with you. I honestly think GE will serve us well over the next decade, but we shall see.

    MCD and BP are both interesting plays right now. I’m not quite sure I’ll add to either one right now, as I’m fairly comfortable with their position sizes. I go back and forth on MCD. I’m just not sure they can get it together. I don’t mind the falling SSS sales, as that is usually just an opportunity buy shares cheaply. Rather, I think they might be facing long-term problems with the business.

    Happy shopping! 🙂

    Best regards.

  91. DM,
    Nice dividend raise from PM this morning 6.4% ($4.00) That equates to a 4.75% YOC. Keeps on chugging along. What’s your thoughts on the current pullback of CVX? still looking @ it……

    Thanks,

  92. j-harr22,

    Indeed! I would think that raise is probably representative of what we should expect from PM for the foreseeable future, which is pretty attractive, considering their yield.

    CVX is my favorite supermajor. As I spoke about before, capex should be reduced going forward. And some of their big projects are going well, from what I understand. I don’t think any of the supermajors are real cheap right now, but I also don’t think you’d regret buying CVX or any others 10 years from now.

    Cheers!

  93. exactly, started my pos in CVX this morning. A little skeptical on the price but, looks to be a good entry price. My portfolio is starting to look great with all the high quality stocks. Up to 11 positions now all with growing dividends!!!!!!!!!

    Thanks for the reply,

  94. Sensim,

    This appears to be a move in the right direction. Appliances are extremely low margin for GE, and better to use the capital and resources elsewhere which will provide better results. I would expect that the next 2-3 years will be very exciting for the company and shareholders. I guess we’ll see. 🙂

    Take care.

  95. Pingback: Recent Buy
  96. David,

    Yeah, I’m pretty excited about that. The time frame is now more aggressive and so are the percentages and moves they’re talking. The less they’re a bank and the more they’re a “GE”, the better. Just my view on it. And I’m probably not going to buy any more GE shares from here, so the big move up isn’t quite the bummer it’d be if I were interested in still building the position out. I happen to think GE is one of the best deals on the market, so this was bound to happen at some point. 🙂

    Cheers!

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