General Electric Co expects to tell shareholders by the end of this year it is ready to raise its dividend as well as resume share buybacks, and return to profit growth in 2010, its CEO said.
Officials with the largest U.S. conglomerate have told investors they expect to boost the dividend -- which was cut by 68 percent during the financial crisis -- again by next year, as the company returns to profit growth.
Pressed by analysts on whether an announcement about a dividend increase was likely to come this year, Chief Executive Jeff Immelt said, That would be my expectation.
The board would have to approve any movement on the payout, he noted, which stands at 10 cents per share each quarter.
GE recorded nine straight quarters of earnings declines through the recession, but expects to break that streak in the second quarter as orders begin to pick up once more, Immelt told an analyst meeting in Florida.
You're going to see really strong earnings growth over the next couple of years, Immelt said, noting that the overall economic environment is improving but volatile.
Its GE Capital finance arm -- which proved to be its weak spot during the credit crunch -- has put the worst of the downturn behind it, he said, while acknowledging, We're still in turbulence, clearly.
Shares of the world's largest maker of jet engines and electricity-producing turbines fell precipitously through the financial crisis, briefly touching 18-year lows below $6 in March 2009. They have since recovered and were off 2 cents at $17.22 on the New York Stock Exchange at mid-afternoon.
M&A FOCUS ON INFRASTRUCTURE
The Fairfield, Connecticut-based company continues to trim its GE Capital finance arm, and expects to resume paying a dividend from that subsidiary to the GE parent company in 2012 -- allowing it to reinvest financial profits in new ventures.
The company does a steady stream of takeovers, Immelt said, and in the future its spending will be on the industrial sector, mostly deals valued at $1 billion to $3 billion.
The future is going to be infrastructure; it's going to be small- to mid-sized deals, Immelt said.
GE's two big infrastructure divisions make a range of heavy equipment, from railroad locomotives, to CT-scan machines, to wind turbines.
Wind has been a fast-growing business for GE in the past years, but Immelt expects it to slow.
The U.S. market, I think, is going to be choppy, he said of wind.
GE expects orders to rise in the second quarter and to post higher quarterly revenue, Immelt said.
It views its shares as attractively priced below $22, a level they have not seen since October 2008, and plans to resume share buybacks later this year, he said.
The company expects to end the year with about $25 billion in cash on its books, following the sale of a majority stake in its NBC Universal media business to No. 1 U.S. cable operator Comcast Corp . That cash pile will help fund any buybacks, acquisitions and a repurchase of the preferred shares GE sold to Warren Buffett's Berkshire Hathaway Inc during the downturn.
But analyst Nicholas Heymann of Sterne Agee said buyback plans could be a lower priority for GE than takeovers and boosting the dividend, which he believed could rise by as much as 25 percent.
While management believes share repurchase could also be in the cards, our sense is that other operating priorities, acquisitions and dividends are likely to be the best way to reward shareholders, Heymann wrote in a note to clients.
GE stopped providing per-share profit guidance, instead offering investors a framework spelling out how it expects its units to perform. The 2010 framework, issued in December, anticipated profit to be roughly flat with last year's level.
Analysts, on average, look for full-year earnings of $1.08, according to Thomson Reuters I/B/E/S.
(Reporting by Scott Malone, editing by Dave Zimmerman, Robert MacMillan and Richard Chang)