GE Capital Corporation, an operating unit of General Electric Company (GE - Analyst Report) , has recently announced that its Board of Directors has approved a proposal to pay a dividend of $6.5 billion in 2013 to its parent. The dividend payout is based on 30% of estimated GE Capital’s earnings in 2013.
In accordance with this plan, GE Capital has already paid $447 million as first quarter dividend to General Electric. In addition to the regular quarterly dividends, GE Capital also intends to pay special dividends to the tune of $4.5 billion in 2013 to its parent entity.
The hefty dividend payments are part of the long-term strategy of GE Capital to reduce its size and simultaneously return significant cash to General Electric. Consequently, as GE Capital earnings increased 9% in first quarter 2013, ending net investment or ENI (excluding cash and cash equivalents) declined 7% to $402 billion with cash balance of $68 billion.
On its part, General Electric intends to return $18 billion cash to shareholders through steady dividend payouts and share repurchases under its balanced capital allocation plan for investment for long-term growth.
General Electric is one of the largest and the most diversified technology and financial services corporations in the world. With products and services ranging from aircraft engines, power generation, water processing, and security technology to medical imaging, business and consumer financing, media content and industrial products, the company serves over 100 million customers worldwide.
Its segments include Power & Water, Oil & Gas, Energy Management, Aviation, Healthcare, Transportation, Home & Business Solutions, and GE Capital. Equipped with a diverse product portfolio, ranging from consumer lending to financial solutions, GE Capital meets the financial needs of businesses of all sizes. The segment includes General Electric’s Commercial Lending and Leasing, Consumer, Real Estate, Energy Financial Services and GE Capital Aviation Services businesses and General Electric Capital Corporation Corporate.
General Electric currently has a Zacks Rank #3 (Hold). Other companies in the industry that are worth mentioning include ITT Corporation (ITT - Analyst Report) , CLARCOR Inc. (CLC - Snapshot Report) , and Honeywell International Inc. (HON - Analyst Report) , each carrying a Zacks Rank #2 (Buy).