Updated from 2:26 p.m. EST
Investors applauded Friday after the board of
approved a 3-for-1 stock split, and the resulting rally pushed the company's market value above $500 billion for much of the day.
The board also voted to increase the company's quarterly dividend and share repurchase program. The dividend will rise 17%, to 41 cents a share from 35 cents a share, and is payable on Jan. 25 of next year to all shareholders at the close of business on Dec. 27. The share repurchase program will expand from $17 billion to $22 billion.
GE closed up 3 7/8, or 2.6%, to 151 1/2, after trading at an all-time high of 154 3/4. The closing price gave the company a market value of $497 billion, second only to the $596 billion market capitalization of
GE's chairman, John F. Welch Jr., said in a statement that the company's actions reflected GE's financial strength and the positive outlook for its diverse businesses. Those businesses include industrial products,
Wall Street agreed. "The split reiterates the notion that this company is really on a roll," said Kent Newcomb, an analyst at
. He rates GE an accumulate and his firm has not done any underwriting for the company.
The timing of the announcement was not a surprise, as the company's shares have climbed almost 30% in the last three months, fueling speculation of a stock split. The split, which is subject to shareholder approval, would be GE's third in the last six years and the ninth in the company's history. The last 3-for-1 split occurred back in 1954.
The 3-for-1 split, versus the usual 2-for-1, was a pleasant surprise to analysts. Typically, GE splits the stock to achieve a $50 price level, but "the stock was so well above 50 that they needed the 3-for-1 to get it there," said James Kelleher, an analyst at
, who rates the company a buy. Argus is a research house that does not participate in underwriting.
"From a mathematical point of view, this doesn't add value, but it's a strong psychological move," he said.
Kelleher added that the bigger news Friday was the increase in both the dividend and share repurchase program, as the stock split was widely publicized and anticipated. "This is a way for the company to return value to shareholders," he said. "The share repurchase program expands earnings."
Since GE began repurchasing stock in December 1994, it has spent more than $15 billion buying more than 300 million shares on the open market.
Earlier this week, Welch projected an extremely positive profit outlook, saying that the company, based in Fairfield, Conn., is on track to grow earnings by 15% in 1999 and 2000. Few seem to doubt his word.
"If you want to participate in the industrial sector -- from washing machines to jet engines to television -- then this is the industrial sector of choice," Kelleher said.