Sterne Agee analyst Ben Elias has seen the future at General Electric (GE), and it is bright. The conglomerate’s path to earnings growth appears clear, Elias argues, with long-cycle industrial businesses like aviation, transport and energy giving the company powerful and visible growth into 2012. GE expects to grow earnings by double-digits in fiscal 2012.
Elias, who recently sat down with the company’s management, said he expects the company’s energy division margins to widen in the fourth quarter, after GE posted narrower margins in the most recent quarter. And he sees GE beginning to grow its dividend and return more cash to shareholders going forward.
“We note growing confidence from GE with regards to GE Cap paying a dividend to the parent company in FY2012. While the FED as new regulator must approve the dividend, once GE Cap pays the dividend to the parent company there are no restrictions preventing GE from paying dividends to shareholders,” Elias writes. “[GE is] on track to return $30 billion in excess capital over 3 years, with 600 million shares to be bought back over the same period while also maintaining a high dividend payout ratio. GE could even repatriate about $18 billion of cash held in Europe for U.S. reinvestment, if favorable tax legislation is passed.”
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