Trades – General Electric (GE) Purchase

GE Imagination at Work - Logo

As part of my process towards increasing and sharing my passive income, I post my trading activity for my dividend growth portfolios. As such, this past week on October 13, I purchased 85 shares of General Electric (GE) at $24.10 per share, giving me a cost basis of $24.16 per share net of commissions. This was my second purchase of GE this year, as I purchased 45 shares back in April of this year.

General Electric is a technology and financial services company that develops and manufactures products for the generation, transmission, distribution, control and utilization of electricity. Its products and services include aircraft engines, power generation, water processing, security technology, medical imaging, business and consumer financing, media content and industrial products. The company operates through eight segments: Power & Water, Oil & Gas, Energy Management, Aviation, Healthcare, Transportation, Home & Business Solutions and GE Capital.

In GE’s just released third quarter earnings results (PDF), they grew earnings per share by 6% over a year ago and now have a record high backlog of work to the tune of $250 billion. They continue to spin-off non-core businesses with the announcement that they are selling their appliances business to Electrolux for $3.3 billion.

Currently generating strong cash flows from a well-developed and increasingly focused corporation provides great opportunity for an investor. Trading at approximately 13.3 time future earnings, GE is fairly valued and is in a position to continue to return strong growth to investors. At this time, GE has a payout ratio just below 60%, which does not have much room to increase their dividends should earnings stall. However, as they streamline and make strategic acquisitions that are accretive to earnings, they shouldn’t have an issue growing dividends in the near future.

GE Trade Details

After making an initial purchase in the spring at a cost basis of $26.60 per share, I was able to average down in a company I am quite bullish on. As I mentioned above, I purchased 85 shares for a total of $2,053.45, or $24.16 per share after commissions. These additional 85 shares brought my overall GE cost basis down to $25.01 per share, with a yield on cost of 3.52%. Some recent weakness in the market really brought the price down from summer highs, given me this opportunity. You can see the last five months below showing the recent decline.

Trades - Purchased General Electric - GE Chart

After lowering their dividend during the financial crisis due to overexposure through their financing arm, GE has raised their dividend for four consecutive years, going from $0.10 per share per quarter at the end of 2009 to $0.22 currently. Their latest increase this past year was 15.8%, going from $0.19 to $0.22 per share per quarter.

My yield on cost for this purchase is a corresponding 3.64%, and increases my forward 12-month dividends by $74.80 to $1,703.56. GE pays its dividends in January, April, July, and October.

I’ve updated my Dividend Growth Portfolio and 2014 Dividend Calendar with this purchase.

 What do you think about this purchase? I know many folks in the DG community have picked up shares of GE this year as they have worked hard to get back on track after a tough period from 2008 to 2009.

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Comments

  1. roadmap2retire says:

    Its a great valuation…and teh future is so bright for GE. I wouldve loved to pick more if I had cash.
    Best wishes
    R2R

  2. Nice buy! I would have been joining you had I had the capital available. Well available to invest. I’ve got plenty of capital but I have no idea what our expenses will be like over the coming months so I’m trying to hoard cash. Horrible time for the markets to dip.

    • Ah capital, the hardest commodity of them all to come by… I am hopefully entering a point where I can invest more regularly in my dividend growth portfolios. Been busy allocating capital elsewhere (house, life, and otherwise).

      Speaking of timing, I had a rollover into my IRA account that has been slow moving, and I completely missed the last week’s dip with that money. A good $10k that will need to find another dip to jump into things.

      Appreciate you stopping by, enjoy your weekend!

  3. GE has been a great stock to accumulate throughout this year. Hopefully it continues to stay in the low 20’s for a while. Another 15% raise puts the yield over 4%, but I think it will be $.02 this time.

    MDP

    • MDP, I agree with you that the next increase will likely not be 15%, but even with another just a 9% raise as you mention would be great. I’d be hitting almost 4% which isn’t too shabby considering they future growth potential as they streamline and double down on their core business.

      Enjoy your weekend!

  4. If I had more cash, I would have been right with you.

    Keep cranking,

    Robert the DividendDreamer

    • Well, at the end of this month your massive GE position will pay out, so hopefully some of that can go back into GE.

      Thanks for stopping by Robert!

      • I had the automatic reinvestment on and you were right. It went right back into more GE Shares. Hopefully, we get a real nice dividend increase. The buybacks have been a lot less this year, so it might be better for us with the dividend hike. Getting to $1.00 level would be real nice. We will see.

        Keep cranking,

        Robert the DividendDreamer

        • I’m hoping for a nice increase, as well as another dip so I can buy more shares! Going to the $1.00 mark would be tremendous bump, and I’d be thankful I was able to add as many shares as I did.

          Thanks for commenting and stopping by, DD.

  5. Nice! GE is one of many stocks I have been looking into adding. The market has made several others appealing! Spent some time deciding what to buy, but ended up being paralyzed by choice =)

    Fortunately, Monday is a new week! Have a good weekend!

    • I am very bullish on GE and wish I’d gotten in on the ground floor a few years ago! I’d like to continue to build this position aggressively over the next few years as the market allows it. Paralysis by analysis. A tough time no doubt. Hopefully you can pull the trigger on something this week. I’ll be watching and seeing what you do!

      Enjoy your weekend as well!

  6. Awesome buy W2R! I would love to be a co-owner with you at some point. I really think GE’s price will be on the rise, so I’m hoping I’ll be able to get into a position in the next few months. I have a REIT on my radar as my larger purchase for the month, but seriously considering GE!

    • I’d be happy to have you SAD! I am happy I was able to scoop some more up prior to the jump in price on Friday due to the positive earning news. I am hopeful it stays flat for the immediate future so folks, myself included, can continue to build a position.

      Best of luck with you future purchases!

  7. GE is a great pick especially these days. Having divested their media assets a while back and most of their financial arm via the SYF spin off and their low margin appliance division, GE can now go back to its industrial roots as an industrial powerhouse and focus on the higher margin products they are known to produce. GE has been with me for a long time and I plan to keep them as a core holding. Thanks for sharing.

    • Any time you see a company divest low margin operations and double down on their core high margin activity, it presents a buying opportunity if you can get in ahead of the growth. With GE, I’m less concerned with pure top-line revenue growth as a result, and more focused on free cash flow and how they are utilizing that to reward shareholders and focus in on hitting future growth targets.

      Glad to be a fellow shareholder and thanks for stopping by DivHut.

  8. Solid buy. I want to add more GE once there’s more cash in the RRSP account.

    • Don’t blame you for wanting to pick up more. Of all of my current positions, GE is probably one of the ones I am most bullish about. I would love to pick up another few hundred shares as soon as possible.

  9. W2R,

    Nice buy. Really like it.

    GE is definitely priced at a value. The business just keeps on improving, yet the stock price has gone nowhere for quite a while. What an opportunity for long-term investors. Looking forward to seeing what the next dividend raise looks like.

    The forward dividends are looking great.

    Best wishes!

    • Thanks DM! I am impressed with the direction the management of GE is continuing to travel and would like to build as big of a position now before the benefits of those decisions are fully recognized by the market! I am expecting a $0.02 increase, or 9%. Definitely nothing to complain about with a company currently yielding in excess of 3.5%!

      As for the forward dividends, they are finally starting to grow as the capital inputs increase. I am hoping to inject some serious capital over the next few years, so things should start taking off from here.

      Appreciate you stopping by and commenting!

  10. This stock really smashed by passive income when the dividend was cut. Still have my 1622 shares and still down over 31%, nearly 10 years since my last purchase. Have found too many good other prospects other than averaging down my current shares.

    • Dave, sorry to hear you got smashed when GE took a big tumble a few years ago. Given you are sitting on 1,622 shares, you are still generating a heck of a passive income stream. Of course, GE is a prime example of why all DG investors should diversify their holdings to protect against one position cutting their dividend or eliminating it entirely.

      Hopefully things continue to bounce back for you (and GE) and we will both be happy in the long-term. Thanks for reading and commenting!

      • Thank you. The CEO of GE was on CNBC just about every other day saying that they would not cut the dividend. I was diversified but concentrated, 9 out of my 17 holdings either cut or froze the dividend In 2008 and 2009. Hopefully we do not go through a period like that again.

        Good luck!

        • Wow, 9 of 17 is an incredible number, and not in a good way! Were you fairly concentrated in bank/financing equities?

          I hope over the years you’ve added some additional layers of diversification with additional positions. Like yourself, I don’t wish for another financial Armageddon, but I wouldn’t mind some discounted shares either! Again, thanks for reading and commenting, I really appreciate it!

          • GM, AIG, BAC, AGN, CHKE, GRMN, KBH, POT, PTR cut or froze their dividend. They were some of the best of breed dividend stocks at the time spread over very different sectors.

          • 10 out of 18, I forgot to count GE too.

          • Wow, that’s incredible. Certainly speaks to the need to have some diversification, not just between equities, but perhaps between passive income sources. I’d be interested in hearing your full story (how you got into dividend stocks) and what you’ve done since the downturn and loss of dividend income as you’ve mentioned. I’d be happy to share it on the blog for sure.

  11. We see value in GE right now and when the market took a slight stumble, grab the opportunity right away! Nice to see people buying the same thing we are buying, its an added peace of mind!
    FFF

    • Good to see that others are finding value in GE, and happy to have you as a fellow shareholder. I believe they are certainly heading in the right direction and have a solid vision for where the company will be going forward.

      Thanks for stopping by FFF.

  12. Welcome co-owner! Great to have you joining in this great company who are going thru restructuring for the better…..

    • Couldn’t agree more David. I am really happy to have picked up some additional shares, and although the stock price has picked back up, I am still keeping an eye on GE to potential add even more.

  13. W2R,

    following many others I’ll go ahead and welcome you as a fellow shareholder.
    We have a very similar entry level.
    GE had a solid Q3 and I can’t wait for GE Capital’s influence to become smaller.

    GE is one of the great industrials.

    • Thank you GI! I am very happy with the direction GE is going and would love to hold several multiples of the amount GE than I currently hold. A prime example of a company that has learned some lessons from past mistakes and is moving forward in the right direction. While there aren’t any guarantees, I am a fan for sure.

      Thanks for stopping by!

  14. Nice buy W2R, it’s a pleasure being a fellow company owner with you! Working in the Diagnostic sector of health care General Electric is no stranger to me. Thanks for sharing

    Ace

    • Lots of fellow shareholders of GE, and I’m glad to be one of them. Pretty awesome that you get to see some of their products in the health care industry. Much like drinking a coke, using Axe body wash, or eating some Fritos, seeing the products of a company you own being consumed or in action is a pretty rewarding experience as an investor.

      I appreciate you stopping by and for your insight!

  15. Hello, I was wondering which company you use for your taxable dividend and IRA accounts. I see you use Loyal3 for fee free purchases but was wondering about the other.

    Also, how did you come to using the company for your taxable & IRA account?

    Love the blog!
    Joe

    • Joe,

      I currently invest with TradeKing for both my taxable and IRA accounts. I primarily use them because they offer $4.95 trades and have good customer service. I do not have any plans of switching at this time.

      I will say I do a thorough evaluation at least once per year to determine if it makes sense to switch brokers or not. For example, I do not use TradeKing for my investment club because they charge extra fees for partnerships. As a result, the low cost of the trades do not matter if I am paying $200 per year just to keep the account open. Originally, I switched to TradeKing for the reasons listed above, great customer service and low trading costs.

      Hope this answers your questions, and thanks for your readership and commenting!

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