General Electric Company (NYSE:GE) Has Above-Market Yield Around 3.4%

June 2, 2017

CEO Heydon Traub of Traub Capital Management says General Electric Company (NYSE:GE) will benefit from increases in infrastructure as well as other areas, and has a sustainable yield around 3.4%.

The part of the market we like most, and I would say part of this relates to our concern that we are near the end of this great market rally, is looking for bigger blue-chip companies. And so GE (NYSE:GE) is one that we like very much and one that has also lagged the market rally in the last year or two, and we think it has a lot of features. It’s obviously a big industrial company that should benefit from what is likely to be some significant increases in infrastructure, where they are a big player.

And they seem a bit tarnished by their exposure to the energy industry, and I think that’s why it has lagged, but in reality, oil and gas is only about 14% of their revenues. And so you know, although that’s been a bit of a drag on their profitability and so on, we think that’s turned around somewhat, and also, they’re doing well in many of the other areas, like in their health care area, their power and water area, and aviation, so those are all areas where I think they’ll benefit.

They’re also a big global player, which we find appealing because we do think valuations outside the U.S. these days are probably a little bit more appealing, and growth is likely to pick up there more relative to here in the U.S., and so they are benefiting from that. They trade at a p/e of just 17 based on this year’s expectations, which is a little below the market, despite the fact that most industrial companies actually trade at a premium. And then, you also have the benefit that they have a yield of about 3.4%, well-above the market, very sustainable, and so if you get kind of a flattish market where the stock isn’t moving and the market is not moving, at least you’re getting 3.5% or so on your yield.