Boston: General Electric Co raised its dividend for a second time this year, in a move the largest US conglomerate said signaled its growing confidence in the rebound of its finance arm.
The world’s biggest maker of electric turbines and jet engines said it would raise its quarterly payout to shareholders by 2 cents per share to 14 cents.
Coupled with a July increase, GE has now raised its dividend by 37% this year, though it remains well below the 31-cent rate in place before chief executive Jeff Immelt slashed the payout in 2009 as the company scrambled to conserve cash during the financial crisis.
The company now aims to pay back about 45% of its annual profit to shareholders in the form of a dividend each year.
GE shares were up 3% in afternoon trading on the New York Stock Exchange.
“They’re signaling a little better environment for the segment of the business that was using cash, which was the financial side” said Peter Klein at Fifth Third Asset Management. “So they’re getting some back and they’re going to give some to us.”
Michael Neal, head of the company’s GE Capital finance arm, told investors earlier this week that the unit expects to grow profit in 2011 and 2012 and resume paying a dividend to the Fairfield, Connecticut-based parent company in 2012.
“We are able to increase the GE dividend for the second time this year because of continued strong cash generation, accelerated recovery at GE Capital and solid underlying performance in our Industrial businesses,” said Immelt, who will brief investors next week on GE’s expectations for 2011.
GE shares rose 53 cents to $17.66. They are up almost 13% so far this year, outperforming both the blue-chip Dow Jones industrial average and Standard & Poor’s 500 index.
The company, which is in the process of selling a majority stake in its NBC Universal media business to No. 1 US cable operator Comcast Corp, has told shareholders it also plans to use cash to buy back a preferred stake it sold to Warren Buffett’s Berkshire Hathaway Inc, repurchase its common stock and fund small acquisitions.
Much of corporate America hoarded its cash during the downturn, and investors are now looking to companies to redeploy those reserves or pay them out to shareholders.
Oliver Pursche, co-portfolio manager of the GMG Defensive Beta Fund, predicted other top multinationals would follow GE’s lead to appease shareholders who have been pleading with them “to stop hoarding cash.”
Fellow industrial Tyco International Ltd late on Thursday said it would seek shareholder approval to boost its dividend by 20%. Transfer company Western Union Co this week raised its dividend and high-end grocer Whole Foods Market Inc said it would resume a payout.
But Pursche said he also believed GE’s move reflected a sense of relief among US business leaders that the Obama administration and the resurgent Republican opposition in Congress had reached a deal on taxes.
“They are growing less concerned about the economic recovery,” Pursche said.
Fellow US manufacturer United Technologies Corp late on Thursday told investors it expects profit to rise 7% to 14% despite an uneven US recovery.