GE: More Dividend Gravy, Please
NEW YORK (TheStreet) -- General Electric (GE) has been on a roll, and with GE Capital now contributing dividends to the parent company, investors are looking for continued rewards.
General Electric announced in May that its GE Capital (GECC) subsidiary would upstream a dividend of $475 million to the parent company in the second quarter, and target a dividends of 30% of the units earnings to the parent for 2012. In addition, GE is planning for GE Capital to pay a special dividend to the parent company of $4.5 billion this year. GE Capital's dividend to the parent was suspended during 2009, as the finance unit worked through the credit crisis.
GE will announce its second-quarter results early Friday, and the consensus among analysts polled by Thomson Reuters is for a profit of 37 cents a share, increasing from 34 cents during the first quarter, and also during the second quarter of 2011.
Analysts expect the company's total second-quarter revenue to come in at $36.8 billion, increasing from $35.2 billion during the first quarter, and $35.6 billion during the second quarter of 2011.
Jack De Gan, the chief investment officer of Harbor Advisory of Portsmouth, N.H., says that GE has "said that they will raise dividend going forward commensurate with earnings growth which means we can see a div increase before the end of the year of about 10%, probably after they upstream the extraordinary dividend from GE capital."
De Gan expects "there may be as much as six billion going upstream by the end of the year, which is going to allow the company to increase the shareholder dividend and fund some buybacks," since the company "would love to get the number of shares outstanding back to where it was before the credit crisis."
Following a strong first quarter, with organic revenue growing from a year earlier, De Gan is looking for a second-quarter growth rating "nothing more than a couple of percentage points lower than that."
GE said in its first-quarter earnings release that it expected industrial profit margins "to increase 50 basis points over the total year as businesses continue to implement productivity projects and recognize value gap improvements." De Gan says he "would like to see more progress this quarter, since meting their earnings expectation is partly based upon meeting another ½ percent of industrial margin."