General Electric Co. (NYSE: GE) is about to enter into 2014 with some wind at its back. We now know what GE plans to do with its U.S. consumer finance operations, and we know by what amount GE will be boosting its dividend.
When GE announced its dividend hike on Friday, it was even more of a dividend hike than we were looking for at 24/7 Wall St. It seemed a safe bet that the $0.19 dividend would be raised to $0.21 per quarter. The hike went to $0.22 instead, a gain of almost 16%.
Does the difference of a mere penny on the dividend matter that much? In this case, it absolutely does. The reason it matters so much to us is because the consensus analyst target of $1.74 in earnings per share for 2014 is only growth of about 6%. Our belief was that GE would modestly raise the payout at the same earnings rate, or about 10%. It makes us wonder if the post-finance GE valuation will suddenly be more clearly evaluated in 2014 and beyond.
As a reminder, when a company raises its dividends it is generally accepted that the company is signaling that it can maintain that payout comfortably (and maybe even more) for the years ahead. This was also the sixth time that Jeff Immelt and team at GE have hiked GE’s common stock dividend since the recession.
GE’s board of directors said that the dividend is payable January 27, 2014, to holders of record at the close of business on December 23, 2013. GE’s ex-dividend date will be December 19, 2013.
We gave a “Getting GE Stock Back to $30” analysis in early in November, and this helps move that along. It may even move it along sooner rather than later.
GE’s share price rose more than 1% to $26.84 on Friday, and GE shares were up at $26.98 in late-morning trading on Monday. Its 52-week of $27.50 is a post-recession high, and the Thomson Reuters consensus price target is up at $28.67.
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