Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Over the past 10 years, General Electric Company (NYSE:GE) has returned an average of 4.00% per year to shareholders in terms of dividend yield. Should it have a place in your portfolio? Let’s take a look at General Electric in more detail. Check out our latest analysis for General Electric
5 checks you should use to assess a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share risen in the past couple of years?
- Does earnings amply cover its dividend payments?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does General Electric fare?
The current payout ratio for GE is negative, meaning that the company is not yet profitable and is paying dividend by dipping into its retained earnings. If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Dividend payments from General Electric have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends. Compared to its peers, General Electric has a yield of 3.27%, which is high for Industrials stocks but still below the market’s top dividend payers.
After digging a little deeper into General Electric’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three important factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for GE’s future growth? Take a look at our free research report of analyst consensus for GE’s outlook.
- Valuation: What is GE worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether GE is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.