GE Capital returns to dividends

Investors applaud the move, sending the stock up more than 3%.

By Jim J. Jubak May 16, 2012 5:50PM
Shares of General Electric (GE) popped Wednesday on news that its finance unit, GE Capital, will resume paying dividends -- to parent General Electric. GE Capital suspended its dividend payments to GE in 2009 in midst of the global financial crisis. (I added General Electric to my dividend income portfolio on Feb. 3, 2011.) 

GE shares closed up 3.3% to $19 after the announcement.

The dividend to GE from GE Capital is a chunk of change even for a company as big as GE. GE Capital will make a $475 million quarterly payout in the second quarter of 2012 and pay a special dividend of $4.5 billion in 2012. Excluding the special dividend, the goal is to pay out 30% of GE Capital's earnings in 2012.

In April, GE had told investors that its goal was a 45% payout, but that the exact level was subject to a Federal Reserve review of GE Capital. Before the financial crisis, GE Capital had paid its parent as much as $8.6 billion in annual dividends. But today's GE Capital is a smaller part of the total GE business now than it was before the crisis. In 2011, GE Capital accounted for 31% of the company’s total revenue. That's in contrast to 2007 when GE Capital represented 39% of GE revenue.

At the time of this writing, Jim Jubak didn't own shares of any companies mentioned in this post in personal portfolios. The mutual fund he manages, Jubak Global Equity Fund (JUBAX), may or may not own positions in any stock mentioned. post. The fund did not own shares of any stock mentioned in this post as of the end of December. For For a full list of the stocks in the fund as of the end of the most recent quarter, see the fund's portfolio here. 
Tags: GE
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