General Electric Co. raised a dividend sooner than it had predicted and restarted a stock buyback program, signaling that its finance and industrial units are generating cash to reward investors. The shares climbed.
GE increased the quarterly payout 20 per cent to 12 cents a share from 10 cents, according to a statement today. The dividend will be paid Oct. 25 to shareholders of record on Sept. 20. The Fairfield, Connecticut-based company also plans to begin repurchasing shares this quarter and extend the program through 2013 from the end of this year.
Chief Executive Officer Jeffrey Immelt and his board are tapping into cash stockpiles they began building in 2008 as the financial crisis deepened. Immelt said today's move doesn't preclude other uses for funds, including acquisitions, as he seeks to bolster profit growth next year.
``This may be the most capitally-efficient way for GE to enhance its share price during a period of extensive market uncertainty,'' said Nick Heymann, a Sterne Agee & Leach Inc. analyst in New York with a ``neutral'' rating on the stock.
GE said July 16 that it expects to have $US25 billion in cash at the parent company level by year-end.
Shares rally
GE rose 50 cents, or 3.3 per cent, to $US15.71 at 4 p.m. in New York Stock Exchange composite trading, the steepest gain since July 7. The shares have advanced 3.8 per cent this year, bringing GE's market value to $US167.7 billion.
The company can buy back $US11.6 billion of shares under the existing repurchase plan. It had 10.7 billion shares outstanding as of March 31, according to data compiled by Bloomberg.
GE's industrial divisions include the world's biggest makers of jet engines, locomotives, power-plant turbines and medical imaging and information technology equipment.
Total equipment orders rose 17 per cent in the second quarter while the backlog held steady at $US172 billion, GE said last week. The company is also shrinking its finance division to account for 30 per cent of profit, down from about half in 2007, lessening the impact of market turbulence.
``We are able to restore the GE dividend at a historical payout level for 2010 earlier than previously anticipated and to extend our share buyback program because of continued strong cash generation, recovery at GE Capital, and solid underlying performance in our industrial businesses through the first half of 2010,'' Immelt said in today's statement.
The company cut its dividend in February 2009 to 10 cents a share from 31 cents, the first reduction since the Great Depression. Immelt said in May he planned to raise the dividend and increase buybacks by 2011.
At the time, Bloomberg estimates showed a payout of 12 cents a share, up from 10 cents.
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