Today, with the price at $27.63 and a one year estimated target of $28.85, a one year estimated capital gain of 4.41% and a yield of just 3.32% results in a one year ROIC of only 7.73%. Not bad, but not great. Add in the fact that the benefits of selling off the financial arm of the company won’t be seen for another 6 months plus the fact that management has already declared that the dividend would remain the same for the next two years, and I've come to the conclusion that there may be better places to invest new money.
I like GE and I have no intention of selling any of the shares that I already own, but I’m not putting any more money into this company. I think the capital gains have already been made for now and the jury is still out on whether they’ll be able to hold on to those gains in the short term. The businesses that they're selling off have high margins while the businesses that they're holding on to have low margins. For me, I want to see if the company can keep the profits increasing from these low margin operations rather than by simply buying back shares to improve earnings. I think they can do it but I also think it may take awhile for that to happen.
I know that many investors will disagree with me but I personally will wait to put any more money into the stock of GE until either the stock price pulls back or the analysts raise their targets. I need a better reason than simply a nice dividend to invest in a company. I need both a growing dividend and an expectation that the value of the shares will increase over time. Neither of these things look feasible for GE in the near term.