Every game has its champion. Or at least an iconic name that, win or lose, exemplifies and even defines the niche in which it plays. When it comes to dividends paid on stock, General Electric (GE) is the most commonly referenced and closely watched player of all.
When it comes to investment return, stocks come in three flavors:
o high dividend stocks that usually don’t see a lot of price appreciation, and therefore pay a hefty cash dividend to support the firm’s ability to acquire capital from the markets; electric utilities are the poster-child for dividend stocks, and while GE isn’t exactly a utility, their dividend history parallels one;
o growth stocks, usually paying no dividend;
o combined growth and income stocks, which pay a cash dividend but whose underlying business holds potential for successful growth in revenues and profits; GE falls squarely into this category.
GE Dividend History
Since the year 2000 (2.5 years after a 2 for 1 split in mid-’97), when GE was paying a dividend of nearly 14 cents a share each quarter, the dividend has – until recently – grown steadily. By the end of 2005 the quarterly dividend was up to 25 cents per share, and as recently as February of 2009 it was at a high of 31 cents, or $1.24 annually.
At that time the stock was in the midst of a major slump, from a high of just under $19 in early November 2008 to a low of $7 in March of ’09. At that time, the $1.24 dividend delivered a rate of return of a whopping 18 percent, a boondoggle in today’s crashing market environment.
Of course, though, few investors owned it at $7. Nearly everybody had a cost basis – which is where an individuals rate of return is calculated – at, in some cases a much higher price, but even then, the rate of return was very competitive in an economy in which banks were paying less than 2 percent interest.
The Day the Hammer Fell
GE was not without its own share of financial woes. So in June of ’09, GE’s Board of Directors cut the dividend to 10 cents per quarter. At that time the stock had returned to a trading range from $11 to $13, which meant the new yield would be in the neighborhood of just over 3 percent.
Still not bad in comparison to many dividend stocks, especially in the combined growth and income sector. But a far cry from the days of double digit returns that once made GE an investor icon.
