GE doesn’t really have a clear core business. They are into everything from nuclear energy to making mortgages to making refrigerators. That makes it a hard business to understand.
Now if you’re just looking for a dividend stock that is in a very large cap stock, this may be a good one to consider. But you want a fundamentally good company to invest in, it may be hard to distinguish here.
GE is indeed a complex company. The executive compensation is sort of like at banks. They continued to rise even during the massive downturn in 2008. It’s curious to me that an executives pay would rise while their share values went down.
In addition, there is a lot of question about whether nuclear will come back from the Japan disaster. Only time will tell.
Analyzing GE Stock – Business Units
Analyzing stocks for certain companies can get really complicated. This is especially the case if you are doing a complete fundamental analysis. This is especially the case for a company like General Electric (GE). They have very large business segments that are worth billions of dollars in of themselves.
Whenever you are learning stock market basics, they just tell you to analyze the company financial statements. Once you get into more advanced analysis techniques, you have to dig deeper into each business unit.
In GE, they have 5 major segments. They have the energy infrastructure, technology infrastructure, NBC Universal, GE Capital and Home & Business Solutions segments. Combined, these segments brought in $150 billion for GE in 2010.
Within each of these segments, they have a profit and loss report. Each of these business units also has their own CEO and Presidents. This enterprise is that big. They also have multiple Board Vice Chairmen.
You almost have to do a fundamental analysis on each segment to make any sense of this company. That is what advanced analysts do. They tear apart the financials to find out what is really going on.
Why GE is a Financial Company
If you look at any classifications for GE, you will see that they are under the financial sector. Just look them up in Google Finance. This is what you will find. Many wonder why this is the case since most of us recognizes them mostly as an appliance manufacturer. The reality is that their finance arm brings in a bulk of their revenues. Most people who are still in the stock market 101 stage won’t get this right away.
The GE Capital division brought in $47 billion in revenues for 2010. That is all the while the Energy and Technology Infrastructure groups brought in around $38 billion each. In fact, the smallest of the segments is the Home & Business Solutions division, which brought in only $8.6 billion. GE Capital does their commercial and consumer financing. Although they brought in $47 billion in sales, they profited only $3,265.
Their Commercial Lending & Leasing unit brought in about $18.45 billion in revenues. Their Consumer Finance unit brought in $17.82 billion. Real Estate unit did $3.7 billion, Energy Financial Services did $1.9 billion and GE Capital Aviation Services did $5 billion.
General Electric Post Nice Earnings
General Electric (GE) posted very nice earnings in Q1 of this year. One of the best investments for those looking for solid dividend stocks may be GE. The earnings beat market expectations, but it is not surprising. Most expectations are influence by the domestic economy. But a lot of their growth was due to their global business.
GE has their hands in many things from manufacturing to financial services. They had a spike in orders and sales for large heavy industrial goods. For example, demand for their locomotive business has gone up.
In addition, a lot of their business comes from the emerging markets. These economies are heavily investing in infrastructure to manage and foster their rapid growth. That is where companies like GE comes in to provide that for them.
GE also raised their dividends from 1 cent to 15 cents per share. That is part of a consistent increase over the last year. That’s a good sign for those interested in dividend stocks.