Monday, March 31, 2014
Weekly Purchase - GE
10 shares GE, 3.41% yield, $8.80 annual income
General Electric is the 41st dividend stock to join my income portfolio. I had been looking to add a new industrial position and really liked what I saw with GE. A couple things prevented me from buying shares up until now: the well publicized dividend cut during 2009 and its reliance on GE Capital. By now most people are probably aware General Electric is looking to shed much of its financial interests and focus on what made it an iconic American company in the first place. I'm talking about its industrial businesses. This company has hands in a lot of industries and manufactures a wide variety of products. Looking around my home, I spot many familiar offerings such as a stove, a dishwasher, a digital tv antenna, light bulbs, and even that little two way coax splitter. Those are the types of products I know and can easily understand, but in reality GE does way more than just that. It also manufacturers high end goods such as nuclear reactors, jet engines, wind turbines, medical diagnostic equipment, etc., etc. Too many to list. From the diversification perspective all these businesses make sense, but on the other hand it does make GE fairly complex.
I'm more comfortable with the conglomerate now it is unloading the riskier finance companies. GE plans to IPO much of its consumer finance business into a stand alone company called Synchrony Financial later this year. I read another article today that reported GE is exploring the sale of an additional finance business based in Europe. It's pretty clear GE is a company in transition, and it just so happens I'm intrigued by the direction it's heading. 5-10 years from GE will look a lot different than it does today.
You might have noticed the stock market jumped back up the past week. Undervalued companies are becoming harder and harder to find. In fact I was hoping to secure GE shares closer to $25, yet I decided to start the position today because I couldn't find anything better. Possibly BP though it looked more attractive last week. I can take solace in GE's 14.2 forward p/e, it's rapidly growing dividend, a 3.4% yield, and the huge backlog of orders estimated to top 200 billion dollars. Funny how a stock this hated just a few years ago staged such a nice comeback and is once again a dividend growth stock.
I have many free trades available and did not pay commissions today. I plan to continue small weekly purchases until my supply of free trades run out.
Core Position: No
Speculative Position: No
Expectations: Steady income; 7% annual dividend growth
Automatic Sell: Frozen dividend; dividend cut
Consider Selling: Business fundamentally changes, management becomes untrustworthy, fundamentals deteriorate, wildly over valued stock price, or position fails to meet expectations