General Electric (GE)

[TopRamenTrader]

GE sounds like something i could hold on to for a very long time. The Div & yield rate is at .88(3.30%)

Its trading at 25.92 which seems pretty high.

Thoughts anyone?

[Dividend Watcher]

Good question, RamenTrader.

Now it depends on what you mean the price is quite high.

The last 4 quarters GAAP reported EPS is $1.61 and GE closed today at $25.83 giving a P/E of 16. Using those numbers, the payout ratio is 55%.

Using the last 4 years year-end EPS numbers, EPS has grown at an average rate of 9% and the CAGR earnings growth is at 9%. Yahoo estimates 7% growth over the next 5 years as does S&P and FinViz.

GE is slowly getting rid of the consumer finance division and I expect a lot of the commercial stuff will go away too except that which is used to service its industrial customers. They're also looking to sell the consumer appliances division. Because of that, the next few years may be more volatile for earnings until they get closer to management's (Immelt's ?) vision of the company for the future.

P/B is around 2 but the PEG is a little over 2, a little high for me but that's what you get in this market.

Morningstar gives it 4 stars with a fair value right around $29.

I'm expecting dividend growth in the 5% range going forward unless they're adamant about upping the payout ratio. I'd prefer they pay down some of the debt first but I don't make those decisions. You may want to look at EMR, HON, UTX or MMM also but GE beats them all in dividend yield. If you can be patient, then maybe GE is a buy for you.

[ChadR]

I agree with Dividend Watcher. GE in my opinion is not overvalued. P/E is 16 and with a dividend yield of 3.3%, this is the type of stock that I like. It is on my short list of a possible August purchase. I am a long term owner of GE and will be for the foreseeable future. I will keep the GE DRIP going and will possibly add more shares this month. Before the end of the year for sure as long as the price doesn't take off any time soon.

[Jimbo]

I am also a long time holder of GE, it happens to be one of my favorite, growth, stability and a sweet dividend.

You will not get rich quick with GE but if you are looking for a long term, good hold GE would be it IMO, drip the divs and watch it grow.

Would love to add more to it but am sitting on a hefty chunk as of now.

Good luck to you and your decision.

Jim

[earthtodan]

GE is one of my core holdings. I see it as a wide-moat diversified industrial that is a major player in lots of sectors I find appealing.

As for the valuation, it's probably fair but not cheap. The high yield comes from a high payout ratio rather than a low stock price. The forward P/E as shown on Finviz.com is about in line with other industrial conglomerates. However keep in mind that about 40% of GE is a bank, and banks are currently valued around 12 p/e. I believe a good comparison would be COF since they are another major credit card lender. If you factor out the financial arm, you get a slightly higher valued industrial company.

GE is in the process of spinning off its financial arm as SYF, so that last part will become a reality.

[TopRamenTrader]

Yeah! I seen that today @earthtodan

http://seekingalpha.com/article/2422335-...e-business

How many shares do you really consider good to have? or is that relevant to to this style of investing?(probably a subject for another thread i'll check for one later)

Agreed @DW choosing something with lower to no debt would be wise.

Thanks for the advice guys I think I'm going in! lol

[EricL]

I'm also long GE and think its a nice long term hold as they are a big part of the booming aviation industry as well as increasing presence in energy and oil & gas. Increased share buybacks after spinoff of financial arm and upcoming sale of appliance business should also be a boost to EPS.

I think the stock is trading right around fair value and with a 3.3% yield presents a decent entry point here.

[hendi_alex]

For now GE is just being used as a covered call play in my active portfolio. Am close to adding a 1x weighting in my long term portfolio however. I like GE's prospects as they shed assets to focus solely on its leading edge industrial design and production activities.

[hendi_alex]

I sold 3 contracts of GE $26 puts in July for 42 cents. With yesterday's close, I'll get the shares with an effective price of $25.58. Not much of a bargain! Will likely sell calls on this batch, on the first decent price jump. Will likely buy my long term shares on top of this batch, currently have a GTC buy in at just under $25.50.

[TopRamenTrader]

Right? @Hendi throwing out fickle consumers of the mix and focusing on industrial production sounds like the way to go imo. Im in on GE so im excited to be in on the ride. @EricL that sounds interesting i wonder what part they would be playing in aviation. i read they are projecting to hit the 30 mark in the next 12 months who knows if its true but the idea of it continuing to grow sounds awesome.

[hendi_alex]

With the shares being put to me with the mid $25's effective price, the almost immediate bump to over $26 represented an excellent time to write $26 calls for a very good contract price. Decided to hold off however, and am keeping this batch for long term. Perhaps will add another batch for covered calls, but am keeping these shares free and clear, as wouldn't want the price to run away without a core of keepers nestled firmly into the flock.