GE to Split Stock, Hike Payout
General Electric Co. on Friday set a 3-for-1 stock split and raised its quarterly dividend 17%, signaling strong confidence about growth and exceeding Wall Street’s expectations.
The company, which makes an array of products from jet engines to lightbulbs and owns the NBC television network, also said it would increase its stock buyback program by $5 billion, to $22 billion.
“Today’s actions by the board of directors reflect GE’s financial strength and the outlook for our diverse array of global leadership businesses,” GE Chief Executive John Welch said.
GE shares surged $4.38 to a record-high close of $152 on the New York Stock Exchange, off the day’s high of $154.69, in heavy trading.
GE’s market value at day’s end stood at nearly $500 billion--compared with about $13 billion when Welch was named chairman and CEO in April 1981, a company spokesman said. GE is the world’s second-biggest company in terms of market value, behind Microsoft Corp.
Although GE shares had traded at record highs lately on expectations of a stock split and dividend increase, analysts said the amount of the dividend rise and share repurchase exceeded their expectations.
“If this was an earnings announcement, they would have beat [expectations],” said Bill Fiala, analyst at Edward Jones in St. Louis.
“The fact that it was such an aggressive move on their part--doing the 3-for-1 instead of the 2-for-1 stock split--increasing the dividend . . . faster than earnings growth and a huge increase in their share repurchase, really reinforces how optimistic GE is about their earnings,” Fiala said.
The stock split is subject to approval by shareholders scheduled to meet April 26. It will be the company’s third stock split in the last six years, fifth in the last 17 years and ninth in GE’s history.
The dividend increase will raise the quarterly payment to 41 cents per share from 35 cents and will be payable Jan. 25 to holders of record as of Dec. 27.
Nick Heymann, an analyst at Prudential Securities, hailed the GE board’s actions as a landmark event for the company.
Heymann said GE is the first “traditional” U.S. manufacturing group to make a successful transition into an “e-commerce” business model, thereby setting the stage for even faster revenue and margin growth over the next three to five years.
