Linked here is a PDF copy of my detailed analysis of General Electric Company (GE) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: General Electric (GE) is a diversified technology, media and financial services company. With products and services ranging from engines, power generation, water processing to medical, financing, media and industrial products.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description: 1.) Avg. High Yield Price, 2.) 20-Year DCF Price, 3.) Avg. P/E Price and 4.) Graham Number. GE is trading at a discount to 1.) and 3.) above. If I exclude the high and low valuation, and average the remaining two valuations, GE is trading at an 8.2% discount. A Star is added since GE is trading at a fair value.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description: 1.) Rolling 4-yr Div. > 15%, 2.) Dividend Growth Rate, 3.) Years of Div. Growth, 4.) 1-Yr. > 5-Yr Growth and 5.) Payout 15% of avg. GE earned one Star in this section for 3.) above. GE has paid a dividend since 1899 and has increased its dividend for the last 20+ years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description: 1.) NPV MMA Diff. and 2.) Years to >MMA. GE earned one Star in this section for 2.) above. If GE grows its dividend at 7.8% per year, it will only take 4 years to equal the long-term average money market rate of 4.61%. GE's NPV MMA Diff is less than the $10,000 I prefer. However, since GE is a Blue-Chip company with a long track record of success, I am comfortable with its NPV MMA Diff of $5,862.
Other: GE is a member of the S&P 500, an Aristocrat and an Achiever.
Conclusion: GE earned a Star in the Fair Value section, earned a Star in the Dividend Analytical Data section and earned a Star in the Dividend Income vs. MMA section for a net total of 3 Stars. This rates GE as a 3-Hold.
In April, GE shocked the U.S. stock market by reporting a 6% drop in first quarter earnings and slashed its 2008 earnings outlook. During its quarterly conference call, Chief Executive Jeff Immelt blamed the miss on Bear Stearns near bankruptcy. "We had planned for an environment that was going to be challenging...[but] after the Bear Stearns event, we experienced an extraordinary disruption in our ability to complete asset sales," Immelt said.
"We are not counting on the business getting any better, vis-à-vis...the U.S. consumer," Immelt said. "We have actually allowed for a worsening of the U.S. consumer in our GE Money business. So I think that is the way to think about the U.S. and the U.S. economy."
After the announcement, GE was pummeled in the market, dropping nearly 13% to $32.05 in heavy trading. Since then it has continued to slide closing Friday at $30.02. GE is widely acknowledged as one of the best managed companies in the world. For long-term investors the circumstances provide a good opportunity to initiate or add to a current position. I added to my position in early May and will continue to add to it as my allocation and GE's valuation will allow.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I owned shares of GE (3.2% of my Income Portfolio).
What are your thoughts on GE?
Recent Stock Analyses:
Popular Posts - Last 7 days
Presented below are my dividend stock and ETF/CEF holdings. This is not a recommendation to buy these securities. I have classified some of...
There is perceived safety in size. Giant corporations aren't randomly grown. Instead, they are carefully built through superior manageme...
When selecting income investments, the three most important questions to answer are: 1.) Is the investment increasing its dividend each yea...
Each Sunday I highlight any notable articles that I came across over the past week, along with any Carnivals I participated in. For those re...
Linked here is a detailed quantitative analysis of General Mills, Inc. (GIS). Below are some highlights from the above linked analysis: C...
Linked here is a detailed quantitative analysis of Walgreen Co. (WAG). Below are some highlights from the above linked analysis: Company ...
Investing in dividend growth stocks is a long-term proposition. One of the beauties of following a dividend growth strategy is that you d...
When to buy a stock and at what price are very important decisions. However, serious investors will tell you the most important decision is ...
Linked here is a detailed quantitative analysis of General Dynamics (GD). Below are some highlights from the above linked analysis: Compa...
Monday, October 31, 2011 will mark my fourth full year of writing as Dividends4Life . It is hard to believe another year has passed. Like th...