Follow the dividend investment decisions of a person who has no background in financial investment and wishes to take control of their financial future.

New Stock Position - 27 Jul 2014 01:10

Tags: ge general_electric

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With the recent pullback in GE's stock price I initiated a small position on Friday 7/25 at a share price of 25.76 which will provide $50 annually to my dividend portfolio.

While I needed an industrial to diversify my portfolio I was not entirely sold on GE's future. Many DG investors over the last two years have been buying shares on the faith of GE's return to its historically legendary performance. But I wasn't convinced that GE was completely out of the woods in regards to risk. I could have initiated a larger position but until certain numbers improve I'll keep a small position.

Starting with the bad numbers. Their debt to equity ratio came in at a whopping 2.38 while most of their competitors have a debt/equity ratio of 1 or less. But in fairness GE has been slowly reducing their debt load over the last 3 years. Another concern is their payout ratio sitting at roughly 60% and again in comparison to their peers who have a ratio below 50% seems to be a bit steep and when vital money may be needed for investment.

Now the good. Revenues are forecasted to grow at an annual rate of 7% over the next 5 years and when combined with a stock repurchase program it makes a dividend growth rate of 7-8% annually very achievable. Reducing exposure to the financial sector is another positive. GE has been slowly divesting GE Capital's assets to reduce over exposure to one industry (it was their down fall in the crash of 2008-09). Looking to exit the appliance business, GE invested heavily to make its appliance segment more efficient and competitive globally which is making the divestiture a more attractive deal than it was just 5-6 years ago. While some might see this as a negative it really isn't, the appliance business while doing well with sales carries very slim margins. As an investor I'd rather see money invested with products or services that have higher profit margins.

Finally the risk. Going forward GE will be acquiring Alstom's power generating business at a cost of $10 billion. There are many what-if scenarios so the future is still unclear. I plan on giving it 2 years to see how this business has been integrated and contributes to profit margins. - Comments: 0

Quarterly Dividend Update - 13 Jul 2014 15:44

Tags:

Quarterly Dividend Growth
% from Div Growth 2.93%
% from New Investments 5.5%
% from Reinvested Div 2.97%
% from Special Dividends 0%
% Overall Growth 11.47%
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Last quarter's new investment in Bar Harbor Bank (BHB) and increasing my position in Ensco (ESV) contributed a 5.5% increase to income. I also initiated a position in Maiden Holdings (MHLD) but it will not start contributing until the 3rd quarter.

For the quarter, there were eight stocks that contributed nicely to my overall passive growth; Air Products (APD), Chevron (CVX), Doctor Pepper-Snapple (DPS), General Mills (GIS), Hasbro (HAS), Peoples Bank (PBCT), Proctor & Gamble (PG, and utlity PPL (PPL). Orgranic passive dividend growth represented a 2.93% increase to income for the quarter.

While the past two quarters were very active with many of my holdings announcing dividend increases, I do not foresee any increase from dividend growth until the 4th quarter so this will be muted until then.

Looking forward to the next quarter I may experience my first decline from quarter to quarter growth. Triangle Capital (TCAP) issued a special dividend that was paid out over the 1st and second quarters. With its end I may not be able to fully compensate even with the additional purchase of Maiden Holdings. - Comments: 0


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