General Electric Dividend Performance

A short time ago, GE announced they were selling part of their insurance business, raising their dividend, and increasing their stock buyback. This was great news for the company and the stock price closed 2.4% higher after the news.

What was most exciting to me is not the stock price, but the new dividend yield on the shares I purchase a couple of years ago. I made an investment in General Electric starting in 2001 that had a dividend yield 1.7% when I invested in it. However, now that GE has again raised its dividend, that dividend yield on the money I had originally had invested is now close to 2.8%.

Thinking about this made me want to take a look at my overall GE investment. I have been investing in GE since 2001 in a DRIP. This table details my annual investments:

Shares

Investment

PV

Return

CAGR

2001

38.6295

$ 1,411.96

$1,389.89

($22.07)

-0.31%

2002

40.3193

$ 1,188.47

$1,450.69

$262.22

5.11%

2003

2.2583

$ 60.67

$81.25

$20.58

10.23%

2004

2.0221

$ 65.57

$72.76

$7.19

5.34%

2005

2.1005

$ 73.91

$75.58

$1.67

2.25%

Total

85.3297

$ 2,800.58

$3,070.16

$269.58

0.59%


Note: PV = Present Value, CAGR= Compound Annual Growth Rate, Dividends are excluded in the returns and CAGR, but dividend reinvestments are included as part of the annual investments.

Looking at this table I am pretty disappointed at the return from appreciation on my GE investment. However, I don't think this table gives us a complete picture. What about the dividend?

Based on the annual investment table above, to date I have acquired 85.3297 shares for an average cost of $32.82 a share (including investment fees). Based on this average share price my GE investment had a dividend yield of 2.68%. Now that they have announced the dividend increase my dividend yield has jumped to 3.05%. If you were to buy GE stock today you can only get it at a dividend yield of 2.8%.

That sounds a little better, but doesn't get me too excited. I bought GE because I thought this was going to be a great stock and help make increase my net worth. How is this going to happen?


Well what I really bought was the future dividends from GE. I thought GE was a great company with great management, and if any company can weather the storm, I think GE will. So if I assume GE will continue to grow and prosper as it has been then what can I expect?

This latest dividend represents a 13.63% increase in the dividend. In fact, GE has long history of annual dividend increases. Since I have owned GE stock the dividend has been increased annually.

Quarterly Dividends
2002 0.16
2003 0.19
2004 0.22
2005 0.25

So what will the dividends look like in 10 years? First let me make some assumptions about the dividend increases. If GE continues to roughly increase its dividend by 13.63% then the annual dividend payments for the next 10 years would look something like this:

Year

AD

DYASP

2005

$ 1.00

3.05%

2006

$ 1.12

3.41%

2007

$ 1.27

3.88%

2008

$ 1.45

4.40%

2009

$ 1.64

5.00%

2010

$ 1.87

5.68%

2011

$ 2.12

6.46%

2012

$ 2.41

7.33%

2013

$ 2.73

8.33%

2014

$ 3.11

9.46%

2015

$ 3.53

10.75%

Notes: AD=Annual Dividend, DYASP=Dividend Yield on Average Stock Price (based on my avg stock price of $32.82)


Wow! Now that is what I am talking about. This suggests that in 10 years I could be yielding over a 10% dividend payment annually. Add a 10% yield to any additional stock appreciation when I sell and this could still turn out to be a great investment. I think this investment is still worth holding.


Considering an investment in a GE or another stock? Take a look at my guide to comparing DRIP fees to Sharebuilder fees to find the lowest cost vehicle.

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Comments (5)


DATE: 7:24 PM
yeah, but whats your compounded annual return?doesn't look too stellar if the stock price doesn't go up.

After reading your opinion of GE stock, I am interested in how you feel about it now. THX

http://www.ge.com/investors/stock_info/dividend_history.html

The dividend history on GE's site doesn't match the numbers in this post. I think you just took the year end quarterly dividend and multiplied by 4. For example, only the last quarter of 2005 was .25. The actual yearly dividend for that year was .91, not 1.00.

Anon -- your correct. They were jsut taking the 4Q dividend x4 to calculate an annual dividend.

The premise should remain the same, its just 3Qs later.

It'd be interesting if you revisted this GE DRIP post to show how well (or not) it matched with the forecast. Especially in light of GE's recent decline.

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