General Electric Co. (GE:US) will buy back an additional $10 billion of shares and increase its dividend for the fifth time since 2010 as Chief Executive Officer Jeffrey Immelt rushes to return cash to investors.
GE raised the payout by 2 cents to 19 cents a share payable on Jan. 25, the Fairfield, Connecticut-based company said today in a statement. The world’s largest maker of jet engines, medical imaging equipment and diesel locomotives slashed the payout to 10 cents a share in 2009 to save cash during the financial crisis.
Immelt is emphasizing both higher dividends (GE:US) and stock buybacks, with GE expecting to generate $100 billion of cash through 2016 as he expands profit margins at industrial units (GE:US) and shrinks financial operations. GE had $4.9 billion remaining on an existing repurchase plan running through next year, and the additional shares will be bought through 2015.
“Returning cash to our shareholders remains a top priority,” Immelt said in the statement. “Coupled with our strong operational outlook, today’s announcement underscores our balanced and disciplined approach to capital allocation.”
Winning Federal Reserve approval in May to tap a $78 billion cash pile (GELK:US) at GE Capital Corp., which freed up money for shareholder benefits, has helped the stock outperform both the Standard & Poor’s 500 Index and industrial peers.
GE was unchanged at $21.62 at the market close in New York. The company has gained 21 percent this year, compared with 12 percent for the Standard & Poor’s 500 and 11 percent for its index (GE:US) of 60 industrial stocks.
Immelt said he wanted to reduce GE’s outstanding shares to fewer than 10 billion and expand the dividend “in line with earnings” while targeting a payout ratio of 45 percent during a Sept. 27 meeting with analysts. There were 10.5 billion shares of GE stock outstanding as of Sept. 30, according to data compiled by Bloomberg.
The buyback and dividend boost follow increased access to cash from GE’s finance unit, with the reinstatement of a payout suspended during the financial crisis. GE Capital returned $5.5 billion this year through the third quarter after resuming the transfers in May, according to a filing with the Securities and Exchange Commission.
Immelt suspended the payments in 2009 to conserve cash as the unit grappled with $32 billion in credit losses.
The company slashed its quarterly payout to common equity holders by 68 percent to 10 cents that February, the first reduction since the Great Depression, to conserve cash as it struggled to navigate the aftermath of Lehman Brothers Holdings Inc.’s collapse.
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