General Electric Dividend Yield May Top 5% in 2012: Analyst (Update 1)

General Electric dividend story updated to include forecast from UBS in seventh paragraph.

NEW YORK ( TheStreet) - General Electric ( GE) may be able to boost its annual dividend to as much as 85 cents per year from its current level of 60 cents, according to Sterne Agee analyst Ray Young.

Such a rise would translate to a 5.1% yield given the GE stock price of $16.61 Wednesday afternoon.

As part of regulatory changes made in the wake of the 2008, GE's financial arm, GE Capital, is now regulated by the Federal Reserve. GE Capital executives spoke optimistically to investors Tuesday about resuming a regular dividend to the parent, which prompted Young to become more optimistic in his projections.

"We were surprised to learn at the outlook meeting that GE Cap will pay a dividend for all of FY12, and not just for the relevant quarter. Thus, there is a scenario that the GE current $0.60 dividend could get an additional boost of $0.20 - $0.25," Young wrote.

Young believes investors are skeptical about GE Capital paying a dividend to the parent in 2012.

"This arises from a complete lack of confidence in GE Capital's earnings power, and liquidity, and/or the Fed's ability to do their job. We disagree with the former, and while we acknowledge that the Fed at times can be short staffed, and potential delays could arise due to their thoroughness, we believe that GE's strong operational performance and valuation should not be affected by such a non-fundamental external factor," he wrote.

Not all analysts are not so sanguine. Jason Feldman of UBS forecasts General Electric will have a dividend yield of 3.9% in 2012 and 4.4% in 2013, according to a report published Tuesday.

But GE Chairman and CEO Jeff Immelt appears determined to raise its dividend regardless of what the Fed has to say.

Speaking to investors in October on General Electric's third quarter earnings call, Immelt said raising the parent's dividend to investors "is a real priority. I think that moves really independently of the Fed process and from the board and from my standpoint it remains an extremely strong priority for the company," he said.

-- Written by Dan Freed in New York. Follow this writer on Twitter.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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