By Al Root
The multiyear turnaround of General Electric, once the most valuable company in the world, continues to be nothing short of amazing. But by one measure, GE's three heirs -- GE Aerospace, GE HealthCare Technologies, and GE Vernova -- have fallen short: their dividends.
It's not that they don't pay dividends or fail to grow them. Earlier this week, GE HealthCare declared a 3.5-cent quarterly dividend, unchanged from recent payouts but up from three cents a year ago. Growth is good, but the stock yields just 0.2%, well below the average yield of 2.3% for a dividend-paying stock in the S&P 500 index.
It's a similar situation for GE HealthCare's siblings, with GE Vernova paying a 25-cent quarterly dividend for a yield of 0.2%, and GE Aerospace offering a 36-cent payout for a yield of 0.6%.
They could be paying so much more. GE HealthCare's dividend is projected to consume only about 5% of its free cash flow in 2025, according to Bloomberg, while Vernova's will account for 10%, and GE Aerospace's for 20%. The average dividend payer in the S&P 500 is expected to pay out 45% of its free cash flow.
If the three GEs paid out an average amount of 2025 estimated free cash flow, GE Aerospace's dividend would double, while GE Vernova's and GE HealthCare's dividends would rise roughly threefold and ninefold, respectively, and they would yield about 1.2%, 0.8%, and 1.8%.
Dividends, of course, don't ramp up overnight. And there are now three GEs with three different management teams, all with their own views of growth and capital deployment, and their own memories of the troubles that forced a breakup in the first place. Still, at an average level, the theoretical payout would produce an "adjusted" GE dividend of almost $1 a share. (We say adjusted because keeping track of GE and its three-way split and subsequent turnaround is, well, complicated. There are buybacks, reverse stock splits, and spinoffs to account for.)
That's a long way off from the adjusted $4.50 the presplit GE paid at its peak in 2000, when it yielded around 4%, or in 2008, when annual dividends peaked at almost $10 a share. From there, it was nothing but downhill, as cuts chipped away at the payout, eventually taking it to an adjusted eight cents a quarter -- or just a penny before the 2021 reverse stock split. To put things in perspective, GE paid out $12.6 billion in dividends in 2008 -- and the three GE's will pay out closer to $1.9 billion in 2025.
Recently, the combined market capitalization of the three GEs exceeded $430 billion, representing 72% of GE's 2000 peak of about $600 billion. It's a massive improvement considering GE's market value fell below $70 billion in late 2018, just after CEO Larry Culp was brought in to try to fix things.
The free-cash-flow recovery is even more impressive. Wall Street projects combined 2025 free cash flow of $10.5 billion, topping GE's free cash flow of $8.7 billion in 2000.
GE's improvement is also seen in Wall Street's view of the three stocks. Some 71% of analysts covering the companies have Buy ratings on GE HealthCare, while 74% have that rating on GE Vernova and 76% on GE Aerospace, well above the average 55% Buy-rating ratio for stocks in the S&P 500. In mid-2018, only about 20% of analysts had Buy ratings on GE shares.
GE Healthcare, GE Aerospace, and GE Vernova are a long way from returning their payouts to GE's peak, but investors -- even previous owners burned by the precipitous decline -- should feel comfortable owning them for income and dividend growth.
GE has come a long way, and there is still more room for improvement.
Write to Al Root at allen.root@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
July 03, 2025 01:30 ET (05:30 GMT)
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