GE Still Bringing Good Things to Life

NEW YORK ( TheStreet) -- Childhood experiences can leave a lasting and positive impression on one's memory. I'm "young" enough to remember the 1965 World's Fair in Queens, N.Y., which I attended with my brother and my uncle who still lives in lower Manhattan.

We took the subway out and whisked through the entrance. The first place I wanted to go was General Electric's ( GE) "Carousel of Progress." It was a theater that turned from one animated scene of the future to another. I was spellbound.

GE isn't as spellbinding today as it was back then, but it still captures both my attention and my imagination. For instance, on 12/12/12 (Wednesday) the Office of the Comptroller of the Currency approved GE Capital's acquisition of MetLife's ( MET) deposit business for $6.5 billion.

This "brings good things to life," and as's Research Director Stephanie Link characterized this transaction, "... (I)t provides a critical addition to GE Capital's Consumer Finance business and the ability to self-fund its private-label credit card receivables."

Jim Cramer, in his own commentary, wrote recently that the move "in itself is a positive, but to take it one step further, there is now a possibility that General Electric could spin out the GE Consumer Finance division at some point.

"For perspective, GE Consumer Finance accounts for about 20% of total General Electric revenue. Should it make this move, the story gets more simple, as General Electric would become more of a pure-play industrial company and offer a higher multiple than the hybrid (quasi industrial/financial) seen right now."

I couldn't agree more.

Jim Cramer and Stephanie Link actively manage a real money portfolio for his charitable trust- enjoy advance notice of every trade, full access to the portfolio, and deep coverage of the latest economic events and market movements.

GE has been a story of near-catastrophe followed by recuperation over the past five years, as the chart below of the share price and quarterly diluted year-over-year earnings-per-share growth demonstrates. The chart shows that the trend in both metrics is positive and moving higher. GE Chart GE data by YCharts

GE is not only the oldest member of the Dow Jones Industrial Average but one of the largest companies in America in terms of its market capitalization, which is over $228 billion. Every day GE shares change hands at an average (three-month) volume of almost 44 million shares.

Fundamentally speaking GE is chugging along at an unremarkable but steady rate of growth. Its operating margin (TTM) as of the quarter ending Sept. 30 is 9.67% and its profit margin a similar 9.37%. Hey, that's almost 10% in each of these important key financial statistics.

It's year-over-year quarterly revenue growth was almost 3% and quarterly earnings rose 8.3%. The statistic that blows me away is its total debt (most recent quarter) of over $431 Billion (that "billion" with a "b"). But that doesn't stop me from owning GE shares. It is in my opinion "too big to fail."

GE's stock has a current yield-to-price of nearly 3.13% representing a sustainable 52% payout ratio. Which brings me to the latest good news that increases GE's ability to "bring good things" to shareholders.

As Cramer and Link explained it: "GE raised its dividend by 12% and increased its share-repurchase program by $10 billion, to be spent by 2015. We have written that we expected a dividend increase of 10%, so this is a little more than that, but we are surprised with the buyback announcement and are pleasantly surprised."

They went on to explain, "The analyst day is Monday (12/17), and we believe we will hear a fairly upbeat presentation, with clarity on margin expansion for its industrial segment and on the long-term strategy for GE Capital. We could see further shrinkage of this division and an eventual spinoff down the road..."

Shares, in their opinion and in mine, are "compelling at the current valuation." We also look at GE as a play on the energy and industrial infrastructure story as well as the recovery in China. All interested shareholders and potential ones will anticipate hearing what CEO Jeff Immelt has to say on Monday.

Candidly, I find GE a proactive company with some excellent long-term plans. I'm adding to my own holdings of it at around $21.70, hoping to collect the increasing dividend and anticipating the ongoing rejuvenation of an old name that knows how to play the "game" of reinventing itself and thriving.

At the time of publication the author had a position in GE.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Most large-cap stocks were once small- and mid-cap stocks. Bryan Ashenberg is here to help you find the cream of the crop amongst the market chaos.

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