I’m seeing red and buying more GE
As I’m sure all of you are aware, General Electric just announced some restructuring and a 50% dividend cut that has not enthused too many investors. Investors nowadays like to see immediate results. A couple of year delay to see the restructuring play out doesn’t sit well with those of us that want our Amazon delivery shipped to our door in a couple hours.
Prior to the dividend cut, GE was paying me $1206.71 per year. The dividend cut brought that down to $603.35. GE stock price has also been the worst performer in the Dow Jones over the last year. It dropped even further with Flannery’s announcement.
Rather than sell, which seems to be the mantra with many hardcore dividend only investors, I recently picked up some more shares.
On November 14th I bought an additional 150 shares at 18.082 and on November 16th purchased 100 more shares at 18.2256. Altogether, these purchases totaled $4545 and added $120 in annual dividends.
I’m now bringing in $723.35/year in dividends with GE’s new rate. Not too bad. Once I get paid this month I may even look to purchase more.
Did you guys more GE as well? Are you waiting for some more catalysts first? Or, does the dividend cut (second since 2008), completely remove GE from your investment criteria?
Will consider buying 100 more shares, but I want to wait a little to see how the stock moves because the recent rollercoaster costed me already quite a bit and I’d like to get more news on this “new course” before committing again. If it goes back at 17/16.50 I will add for sure (regardless of the news). But is one of the stocks in my watchlist!
Thanks for the comment. GE has become one of my largest holdings, but I agree with you. Will likely add more if it drops any further.
Hi Scott, The dividend reduction really bothered me. I have been a long time holder and also endured the 2009 cut. I am currently holding on for a higher price in hopes of selling at that time. I won’t buy more. I can’t argue with your strategy, if you feel they can get the company turned around. Let’s hope they do as co-owners in this business, Tom
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I think they’ll be able to turn the company around. The current dividend isn’t too bad…I think it is still higher than the average for the S&P 500.
I haven’t owned GE for many, many years. Given GE’s current troubles I’m not currently looking to invest in it, as the turnaround will most likely take some time. However, if I owned shares, I would probably hold to see what happens, or sell to move on. I wouldn’t see myself adding more. However, maybe adding more will turn out to be the right thing to do… time will tell.
Unfortunately, the dividend cut led to quite an income reduction for you due to GE’s weight in the portfolio. Hopefully you’ll find a good stock or two to help replace that income. Here’s hoping GE finds a way to right the ship.
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Hi Engineering Dividends,
That’s a smart strategy to see the stock start turning around before investing in it. You might miss the very, very bottom doing it that way but it’s probably a good way to make sure the momentum is heading in the right direction.
Interesting take Scott. As you said, I know many of the people are running for the doors post cut. I can say that I am sitting here holding KMI post their dividend cut and am still waiting for the recovery. I’m sure KMI’s recovery has been hampered by the oil market which is another outside factor the company has less control over, but it sounds like they are getting ready to become a dividend growth stock. It is hard to exercise patience with turnarounds and it can be frustrating (as I still am with KMI), you just have to believe the company is better off post dividend cut and their balance sheet will set them up for success. With GE though, that is hard to tell. I’m pulling for you and hey, at least you lowered your cost basis when all is said and done.
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Bert, I am with you on KMI! 🙂 Still holding my shares… 🙂
KMI is one that I actually did end up selling and taking a loss loss, which was okay since I used that to offset a bunch of capital gains from selling calls on Apple.
I do believe GE is better off now after the cut. I think pretty much all the negatives are factored into the stock price now. A generalized drop in the overall market would still certainly hurt them, however.
Thanks for sharing your buy! I still can’t decide if I want to buy a little more of GE.
Hi Happy Health and Wealthy Girl,
Thanks for commenting! I think you’ll have awhile to decide. In fact, GE might even drop a bit lower as some people will likely sell GE to lock in their loss before the end of the year.
Hi Scott, interesting move. I own stocks of Swiss/Swedish competitor ABB and I have had GE on my watchlist for several years now and in my view there‘s a lot to like with that company. I decided to stay on the sideline, I want to see how the restructuring works. I can remember when Rio Tinto and BHP Billiton had to slash their dividends, many investors found it an unforgiving move. Well, patient shareholders were rewarded handsomely lateron. You never know the outcome when a company undergoes a tough time, but a dividend cut per se by far does not mean the end of a business.
Agree completely, Financial Shaper. While I like dividends, ultimately it is about total gains. I’m hoping for the rewarded handsomely by buying now mindset. GE has a lot of catalysts behind it.
Im down about 30% on this and its my largest position and I think Im going to take one more crack at it overtime I think we will be rewarded nicely Flannery made his estimates very low because obviously he wants to hit with no exception !
Awesome analysis, alex. It is crazy how much power analysts have. I agree that Flannery will likely keep estimates low. By beating those, the stock will take off. It’s crazy how it works. It is really not the actual numbers that matter quarter-to-quarter but how those numbers compare to what analysts are predicting.
I understand why you picked some up. I’m still holding on to my GE and have no plans to sell. In fact, should GE stay in the teens it looks like a front runner for my December buy. Long GE!
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I’ll be excited to follow your December buys. I’ll probably hold off until January to buy any more. It is likely that there will be pressure for the stock to go a bit lower before the new year as people are selling to lock in their loss for tax purposes. I’ll use that opportunity to load up on some more.
Am I missing something? GE cuts its dividend and you buy more going aginst your buying / investing philosophy. Paying 4250 to get 120$ doesn’t seem like a good deal at all.
Thanks for the comment. It doesn’t go against my investing philosophy at all. While I obviously like dividend paying (and growing) stocks, I’m ultimately about the overall total gains, which is a combination of stock appreciation and dividends. I don’t immediately sell a company because of a dividend cut or lack of dividend growth like some dividend only investors do.
When a company cuts its dividend, I analyze the reasons for doing so and see if there’s a reason to keep owning it, which with GE I feel there is.
The current dividend of GE is about 2.6%, much higher than the yield of S&P 500, which is around 1.8%.
I also own quite a few companies that do not pay any dividend at all…paying a dividend isn’t the end all and be all for my investing philosophy.
I’m just curious what you like about GE or what makes you so confident to invest in it now, especially after the cut, given the issues they are facing and the spotty dividend history.
Hi Mr. ATM (love the play on words!),
I don’t know for sure but at this point everything bad is pretty much factored in. The dividend has already been cut, analysts have lowered predictions, and the entire market pretty much hates it. I’m okay with a spotty dividend history, to be honest, because I feel there’s a lot of growth in its future from a capital gains standpoint. Plus, while it no longer pays AT&T level dividends of around 5%, it still pays a decent dividend that is higher than the S&P500.
Nice purchases I have a feeling in a 3-5 years GE will start bouncing back and you will start seeing gains and hopefully some dividend increases to get your income back. Thanks for sharing.
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Thanks, Matthew. That is my exact hope as well. I bet 20 years from now we’ll be looking back wondering why we didn’t buy more of GE when it was trading at 18.
I also decided to keep my shares of GE post cut. Although my position in them is relatively small so It doesn’t bother me that much to see them drop. I’ll just DRIP the dividends at the lower price and hope for a nice rebound in a few years. Hope your continued buys pay off.
Thanks, Dividend Daze. We’ll see what happens to the price when people sell later this month for tax loss purposes. There might be another opportunity to pick up some even cheaper shares!
I hope both our investments perform well over the coming years.
I’m curious to see how the tax cut will impact GE. Will they repatriate a lot of overseas cash and buyback stocks?
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I wonder too. Most companies seem to buy back their stock when times are good, meaning that they are likely buying their shares when it is at a premium. GE doing share buybacks now would actually be pretty smart in the long run, I think.
I invested in BAC for years while it was all over the place so I really feel the pain of being in GE. Rumor is that GE might cut dividend again so another stock drop too. So sad to see GE falling. If it wasn’t for the rumors, I’d buy some and wait, waiting for BAC paid off.
I actually did recently sell some of my GE to lock in capital losses. I then used some of those proceeds to buy more T. I liked seeing T fall a bit after the merger got approved since I feel it now has a lot of growth potential. T is close to the cheapest the stock has been in years.
I invested in BAC when it was around 12-13 or so. Sounds like we are both doing great there!
Wish GE would get things figured out. Would like to keep them in my portfolio, but as it is now there are better things out there with a nicer dividend and more growth as well.