General Electric Company (GE) is een multinationaal en mondiaal opererend technologie, elektronica en dienstenconcern. GE is tevens het grootste conglomeraat ter wereld en het op een na grootste bedrijf ter wereld. Het hoofdkantoor is gevestigd in Fairfield, Connecticut in de Verenigde Staten. Opgericht door Thomas Edison, die met de uitvinding van de elektrische lamp misschien wel een van de beroemdste uitvindingen ooit deed, ontwikkelt en verkoopt General Electric (GE) producten voor het opwekken, distribueren en toepassen van elektriciteit. Niet alleen huishoudelijke apparatuur rolt van de productiebanden bij GE, maar ook zeer veel industriële producten. Denk hierbij aan het produceren en ontwikkelen van straalvliegtuigmotoren, treinen en medische apparatuur. Daarnaast is GE actief in halfgeleiders, het maken van plastic, maar ook bezit GE televisie-en filmnetwerken. Groot geworden door autonome groei, is GE ook een bedrijf dat wil groeien door het overnemen van andere bedrijven. Honderd overnames per jaar zijn geen uitzondering voor GE.
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How General Electric's Buyback Leads To 10% Annual Dividend Growth
As General Electric (GE) continues to shed its financial assets (after eliminating most of its low-quality assets tied to real estate, the company is now spinning off its private label credit card operations worth $15-$20 billion), the company is becoming easier to analyze for dividend growth purposes because of its renewed focus on industrial activities (think engine and aviation production, water processing, medical device manufacturing, household appliances, oil and gas, and transportation construction).
And as we look to make determinations about a post-recession GE without a strong financial presence, we can see that the company has the ability to create about 8% ongoing earnings per share growth from its industrial divisions. You can explain the first 6% of the annual growth by looking to GE's ongoing efforts to work through its ongoing $200+ billion backlog, and the other 2% annual growth will come from (1) GE's plans to cut costs by $2 billion or so per year, and (2) GE's acquisitive habit of making $5 billion or so worth of bolt-on industrial acquisitions per year.
When we try to figure out how this will affect General Electric's dividend policy going forward, the questions we have to ask are: (1) Does General Electric have meaningful room to expand its payout ratio? And the other question is: (2) What will be the company's earnings per share growth rate over the medium term when we tally up the base rate of earnings per share growth in addition to share count reductions caused by stock buybacks?
Right now, General Electric is pumping out $1.65 per share in profits for shareholders (although some stock screeners understate GE's profits at $1.40 per share by factoring one-time events associated with asset shedding that will not be impairing GE going forward). Taking into account GE's recent dividend hike to $0.22 per share quarterly, GE's annual payout of $0.88 per share represents approximately 53.3% of ongoing profits. Normally, GE's returns approximately half of its profits to shareholders as a dividend, although the payout ratio has spent some years around 60% of profits in "normal" economic times historically. Although the recent 16% dividend hike was nice, expectations about dividend growth going forward over the next five to ten years ought to closely mimic the company's earnings per share growth rate over the time frame.
That leads us into the second question: What will be the company's earnings per share growth rate when we factor in the stock buybacks as well? Once we adjust for the higher than usual buybacks at GE that resulted from the sale of NBC, we can see that GE is now buying back stock at an average rate of about $2 billion per quarter, which at the current price of roughly $27 per share, results in an annual share count reduction of almost 3% annually.
This is what makes GE such a compelling buy going forward for investors that focus on the growth in income: GE has the infrastructure in place to give investors dividend growth of around 10% on average for the next 5-10 years because the company is growing profits by 8% annually when you take into account the pace at which GE is addressing its $200 billion backlog, and then factor in the $2 billion annual cost cuts in combination with the $5 billion or so in annual acquisitions that seems to be ingrained in the DNA of GE's long-term growth strategy.
But the company's commitment to buying back $2 billion per quarter in stock gives GE the ability to add another three percentage points to its earnings per share growth rate, and this is what is going to allow GE shareholders to experience dividend growth closer to the 10% range over the coming five to ten years rather than around 7% or so in congruence with its regular earnings per share growth rate without accounting for buybacks.
The catch, if you will, going forward is that GE's price could rise significantly in the next year or two, weakening the effectiveness of the buyback program. If, say, GE had to buy back its shares at $35 per share rather than $27 per share, then the buyback may only add 2% or so to the earnings per share growth figure. Somewhat paradoxically, the lower GE's stock price over the coming years, the more cash GE will have available to return to shareholders in the form of dividends. But if the price of the stock does not increase rapidly, then it seems that GE has the infrastructure in place to give shareholders dividend hikes that come within the ballpark of 10% annual dividend growth due to the combination of 8% "regular" earnings per share growth combined with another 3% stimulated by GE's ongoing buyback program.
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AMSTERDAM (Dow Jones)--General Electric Co. (GE) heeft in het vierde kwartaal 4,8% meer winst gemaakt dan een jaar eerder, blijkt vrijdag bij het openen van de boeken over de afgelopen verslagperiode. De lichte winststijging was vooral te danken aan een omzetgroei bij de industriele tak.
Bij de industriele activiteiten, inclusief energie-infrastructuur en luchtvaart, steeg de omzet met 6,1% tot $29,95 miljard. De orders binnen die tak stegen met 8% tot $30,7 miljard. Bij GE Capital, de financiele dienstverlener van GE, ging de omzet met 4,5% omlaag tot $11,08 miljard.
Het Amerikaanse conglomeraat investeerde de afgelopen tijd meer in nieuwe industriele activiteiten zoals olie en gas en deed onderdelen binnen zijn divisie financiele dienstverlening, denk aan vastgoed en aandelen in internationale banken, van de hand.
Volgens chief executive Jeff Immelt werd in 2013 voor $1,6 miljard aan kosten bespaard.
"GE is het jaar geeindigd met sterke vierde kwartaalresultaten en een groei van de brutomarge binnen een verbeterd maar verdeeld economisch klimaat. In groeimarkten ging het goed, de VS was sterk en in Europa was het beeld gemengd."
GE rapporteerde een nettowinst van $4,2 miljard of 41 cent per aandeel, van $4,1 miljard, of 38 cent per aandeel in de laatste drie maanden van 2012. De operationele winst kwam uit op 53 cent per aandeel, tegen 44 cent per aandeel in het vierde kwartaal van 2012.
De omzet steeg in de verslagperiode met 3,1% tot $40,38 miljard.
Door Thomson Reuters geraadpleegde economen hadden een operationele winst van 53 cent per aandeel voorzien en een omzet van $40,22 miljard.
Weet er iemand de precieze datum van de split?
Het is de bedoeling te verkopen vlak voor de geplande split.
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GE Seeks to Raise $3.1 Billion in Synchrony IPO
General Electric Co. GE -0.56% Chief Executive Jeff Immelt's strategy to increase earnings from the conglomerate's industrial businesses while shrinking its financial operation showed signs of new traction in the latest quarter.
On Friday, GE reported a 13% rise in profit and a 3% increase in revenue on strong earnings from its jet engine and oil and gas equipment businesses. The company also kicked off its planned spinoff of its $20 billion North American consumer finance business through an initial public offering.
Still, industrial-equipment order weakness in the quarter suggested that the businesses aren't firing on all cylinders. Orders for the quarter fell from a year earlier in all industrial businesses except for the transportation unit, which jumped 40% on the strength of new orders for locomotives.
GE shares, which are down 6% so far this year, fell 1% Friday.
The consumer finance IPO sets in motion GE's biggest move to slim down its giant GE Capital business as Mr. Immelt weans the company off financial earnings, a step that could help boost its share price. Mr. Immelt expects to reduce the share of profits from GE Capital to 25% of the company's total by 2016 from over 40% currently.
To achieve that goal, he is shedding financial assets while trying to spur growth and cut costs in core industrial businesses, like power turbines and locomotives. GE's move to acquire the energy assets of France's Alstom SA ALO.FR +0.80% for $17 billion would add to its industrial heft.
"We are boldly reshaping the company," Mr. Immelt said during a conference call.
GE on Friday began marketing Synchrony Financial, the re-christened consumer finance business, to investors. The company is seeking to raise about $3.1 billion for the business by selling a 15% stake. Synchrony offers retail financing and backs store-branded credit cards at Wal-Mart WMT +0.59% Stores Inc., Lowe's LOW +1.04% Cos. and J.C. Penney Co. JCP +0.23% , among others.
Synchrony set an expected price range of between $23 and $26 each for a 125 million share offer with the goal of a listing by the end of July. The price range would value Synchrony at around $20 billion.
The IPO would be the biggest debut by a U.S. company this year so far, topping April's $2.6 billion stock offering by lender Ally Financial Inc. ALLY +2.13% GE's stake in the business would be worth about $17 billion.
Mr. Immelt said another element of his restructuring plan was on track: divesting $4 billion of noncore industrial businesses over the course of 2014.
GE hasn't said which businesses it would cut loose, but people familiar with the matter said this week that there is renewed discussion of jettisoning its home appliance unit, which remains profitable but at lower margins than some of GE's other operations. GE Chief Financial Officer Jeff Bornstein declined to comment on the matter.
GE posted second-quarter earnings of $3.55 billion on revenue of $36.23 billion. Its industrial businesses posted a 9% increase in profit during the latest period, along with wider margins. GE Capital profits were down 5%.
"The environment continues to be generally positive," Mr. Immelt said citing improved rail loadings, better demand for commercial credit, and stronger sales of appliances.
A stagnant U.S. market for medical devices is slowing performance in GE's health care business, which reported flat revenues from a year earlier. CFO Mr. Bornstein said a combination of uncertainty from the implementation of the Affordable Care Act and "increased consumerism" from patients was prompting U.S. hospitals and clinics to hold back from making new orders of heavy medical equipment, like the scanners and X-ray units GE makes.
Mr. Immelt was unfazed, and suggested it was one more reason to embrace the conglomerate model that he has been trying to bulwark.
"I think the good part about GE is we have other segments that will be higher than our original expectations and so that in total we still feel good about the overall framework" of industrial profit growth, he said.
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