To say that Dow 30 component General Electric (GE - Free GE Stock Report) is simply a diversified industrial giant doesn’t do the company justice. Before we discuss what makes this blue chip worthy of inclusion in a well-balanced portfolio, we provide a synopsis of the corporation’s history to help give readers some perspective of the breadth of GE’s operations. (Learn more about the company’s background in our Dow 30 Profile.) As one of the oldest, most prominent companies in the United States, General Electric’s rich history dates back to the late 1890’s, when it was born out of a merger between two fellow competitors that focused on electrical technologies. The consolidation essentially occurred following the invention of the electric light bulb by Thomas Alva Edison. Once those operations got under way, GE became one of the original 12 members of the Dow Jones Industrial Average in 1896, and it has remained part of that elite group of stocks ever since.
Over the next century, the newly formed entity would expand on its light bulb creation, and innovate or improve on a range of other technologies in a vast number of categories, from media (i.e., radio, TV) to communications and radar to electronics and appliances. It would also make its mark in the aerospace, science, and healthcare industries. Through a series of mergers and acquisitions, and internal expansion efforts, GE would eventually extend its reach into other realms, including computer manufacturing (until its exit in 1970), financial/credit services, and energy and technology infrastructure, among others, becoming one of the world’s largest and most diverse conglomerates. The Blurb section of our Value Line page provides a brief business description.
Scanning down the list of Dow 30 stocks in our service, we note that General Electric is among the few standouts for Timeliness. Indeed, while most blue chips are not typically known for superior short-term price performance, GE is currently ranked 2 (Above Average) for Timeliness, having been upgraded from 3 (Average) the last time it went to press (as shown in the Ranks box at the top left-hand corner of the page). Remember, this measures a stock’s price and earnings momentum compared to the performance of the broader market, and it ranges from 1 (Highest) to 5 (Lowest).
But the issue’s allure isn’t just limited to its favorable Timeliness rank. The dividend yield (in the Top Label) is fairly eye-catching at 3.6%. This indicates the expected return from cash distributions on the equity over the coming 12 months. Annual dividend per share amounts and increases that have been declared and paid, along with analyst projections of future disbursements, can be found in the Statistical Array (middle section of the page), while quarterly payments made so far by the company are located in the Quarterly Dividend box (bottom left-hand corner).
No doubt, General Electric goes the distance to keep its shareholders happy, returning value in different forms, whether by doling out cash dividends or buying back a portion of the outstanding stock. In fact, this is supported by the covering analyst, Erik M. Manning, in the Commentary section of the page, in which he states “GE plans on returning about $12 billion in cash to its stockholders this year via dividends and share repurchases”.
Still, GE has more to offer investors. Glancing over at the Projections box, just beneath the Ranks box, we see that long-term capital appreciation potential is substantial here, based on the percentage price gains expected over the coming three to five years. These take into account the current stock price (shown on the Top Label) and the High and Low Price range estimated by the analyst over the long term. In the same box, the annual total return shows the estimated rate of return including both price appreciation and prospective dividends to be paid through the 3- to 5-year time frame. These figures clearly highlight the issue as a solid income-and-growth selection, appropriate for any well-rounded portfolio.
Indeed, Erik M. Manning sums it up nicely in the last paragraph of the Commentary, pointing out that the “blue chip is best suited for buy-and-hold investors” and that “the stock’s yield should hover above 3%”.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.