Industrial manufacturing behemoth General Electric Company GE recently announced a 4% hike in its dividend payout to a quarterly payment of 24 cents per share or 96 cents on an annualized basis. The increased dividend is payable on Jan 25, 2017 to shareholders of record as on Dec 27, 2016.
Based on the closing price of $31.78 on Dec 9, 2016, the proposed dividend affirms a yield of 3.0%. A steady dividend payout is part of the long-term strategy of General Electric to provide attractive risk-adjusted returns to its stockholders. In addition, decent dividend increases at periodic intervals have been one of the company’s most attractive features.
General Electric has consistently returned significant cash to its shareholders through dividends and share repurchases. During the first nine months of 2016, GE Capital returned $16 billion in dividends to parent General Electric and remained on track to exceed the tally of $18 billion in 2016. General Electric intends to return $30 billion to the shareholders in 2016, including $8 billion in dividends and $22 billion in share repurchases. In addition, the company expects to generate in excess of $32 billion in cash flow from operations in 2016, up from $30–$32 billion expected earlier.
General Electric is pruning its operating portfolio to focus on core manufacturing businesses with a digital edge. Post 3Q earnings, General Electric outperformed the Zacks categorized Diversified Operations industry driven by a string of strategic acquisitions and collaborations with an average return of 9.7% compared with 8.5% of the latter.
Last month, GE Digital acquired ServiceMax, a premier cloud-based field service management solutions provider. The buyout will enable General Electric to automate and digitize the servicing of heavy-duty machinery as it aims to focus on core manufacturing businesses with a digital edge.
The acquisition is likely to accelerate the commercialization of the Predix software of General Electric. Predix is designed to add intelligence to the Internet of Things applications. It helps companies to connect their machines, data and people and run industrial-scale analytics. The combination of machine connectivity with a data lifecycle management platform powered by engineering simulation will help diverse firms to design their products for the Industrial Internet in the best way possible. This would facilitate the company to accelerate GE Digital’s existing services solution roadmaps and augment its digital focus.
In September, GE Digital acquired Meridium, Inc., a global leader in asset performance management (APM) software and services for asset-intensive industries. Meridium combines real-time analytics with reliability-centered maintenance services to offer an integrated APM solution for its clients. The acquisition will facilitate GE Digital to augment its comprehensive APM offering by leveraging Meridium’s expertise in cognitive analytics, reliability-centered maintenance, operational risk management and asset health, as well as intelligent asset strategies.
We remain impressed by the focused growth initiatives of this Zacks Rank #3 (Hold) stock to improve its revenues. Some better-ranked stocks in the industry include Koninklijke KPN N.V. KKPNF, Hitachi, Ltd. HTHIY and Danaher Corp. DHR, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Koninklijke KPN N.V. is currently trading at a forward P/E of 26.3x.
Hitachi has a long-term earnings growth expectation of 13% and has beaten estimates thrice in the trailing four quarters for an average positive earnings surprise of 103.5%.
Danaher has long-term earnings growth expectation of 11.9% and has beaten estimates thrice in the trailing four quarters for an average positive earnings surprise of 6.1%.
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