This paper seeks to determine and understand the dividend yield of GE in relation to how the company is using the same to attain its corporate objectives. This will also determine if the dividend yield is what is expected from such as established company as GE and whether the company’s record of paying dividends attracts common stockholders with justification. The GE’s dividend yield for the past 12 months is 4.64% for the most recent 12 months available (MSN, 2008a) as computed using the formula that divides annual dividend per to share by the price per share of the GE’s stock.
To determine of if the said level of dividend yield is what is expected from GE, the same may be compared with the company’s net profit margin of 12. 02%. Since dividend yield is lower, it means the company is only distributing a portion of its earnings as dividend for the year and such is expected. A company should not normally provide dividends higher than what it currently earns otherwise the corporation may be unnecessarily returning capital to stockholders and which will indicate the company has no future plans for expansion.
The GE’s record of paying dividends may be said to be an attractive feature of its common stock since as could be the found in the behavior of its stock price for the last ten years, there have been no unending declines to speak with even if the face of present economic problems in the United States. The 9/11 event in 2001 may have affected the company as stock price declined then but after a certain period stock price was able to recover.
The fact the stock price of the company has rebounded manifests that the company is really stable and its policy of paying yearly dividends may have in fact contributed to the cause of its stability for many years. In fact the company has been paying dividends for over hundred years already (Mapofworld. com, 2008). When viewed in terms of 50-year period, the effect of dividend policy is more clearly evident as the company may be said to have exhibited continued slight increase in stock price for the period.
References
- Mapofworld. com (2008) GE Dividend, {www document} URL http://finance. mapsofworld. com/dividend/company/ge. html, Accessed September 14,2008 MSN (2008a)
- General Electric Company Report, {www document} URL http://moneycentral. msn. com/companyreport? Symbol=GE, Accessed September 14, 2008 MSN (2008b)
- Stock Price Graph for 10 years, {www document} URL http://moneycentral. msn.com/investor/charts/chartdl. aspx.D5=0&ComparisonsForm=1&D4=1&ViewType=0&CP=0&PT=8&CE=0&&ShowChtBt=Refresh+Chart&DateRangeForm=1&D3=0&PeriodType=8&Symbol=GE&C9=2&DisplayForm=1, Accessed September 14, 2008 MSN (2008c)
- Stock Price Graph for 50 years, {www document} URL http://moneycentral. msn. com/investor/charts/chartdl. aspx
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