GE Shareholders to Share the Wealth in $10-Billion Buyback

General Electric Co., flush with cash, today announced the biggest single stock repurchase program in U.S. corporate history, $10 billion over five years.

The action, coupled with a 15% increase in dividends, was aimed at satisfying investors who complained the company has not been using its excess cash to benefit its shareholders.

GE was up $1.87 1/2 a share to $59.37 1/2 in late-morning trading on the New York Stock Exchange, supporting the overall stock market.

The repurchase authorized by the board of directors would amount to about 20% of GE’s stock at current prices. The dividend increase brings the quarterly dividend to 47 cents a share.

“We’ve looked at all the alternatives and reached the conclusion that GE stock is the best investment we can make,” John F. Welch Jr., the GE chairman, said in a statement.

The $10-billion total is by far the biggest buyback announced at one time, but it is spread out over five years. Other companies have announced a succession of shorter-term buybacks that total billions of dollars. The closest in a single announcement was Atlantic Richfield Co. with $4 billion in 1985.

GE said shares will be repurchased in the open market with funds from a combination of borrowings and cash generated by the business. The repurchasing would be curtailed in case of a multibillion-dollar acquisition, unfavorable world economic conditions or certain other circumstances, GE said.

GE said that it had reviewed the share repurchase plan with the debt-rating agencies and that they had confirmed GE’s Triple A debt rating.

At Moody’s Investors Service Inc., analyst Alfred Pastore said, “They’re pretty sharp people, and we feel they’re going to do the right thing with the money, not spend it foolishly.”

The huge buyback provoked questions about whether GE was being too conservative with its money when it could be using it to buy other companies or build existing businesses.

But analyst Linda Shuman of Prudential-Bache Securities Inc. said GE had come under heat from institutional investors for the exact opposite reason, putting money into risky investments instead of returning it to shareholders.