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Monday, February 14, 2011

GE Raises the Dividend for the Second Time in a Year

General Electric GE increased its quarterly dividend for the second time this year to $0.14 per share, or an annualized rate of $0.56 per share. The prior dividend rate was $0.12 per quarter. This announcement is consistent with management's stated intentions and supports our thesis for the company.

More important, I think the decision reflects the board's confidence in GE's core business. I expect GE to continue to repurchase shares up to the stated threshold of $22 per share as well as pursue acquisitions below $3 billion. Additionally, GE is first eligible to repurchase the preferred shares sold to Berkshire Hathaway BRK.B in October 2011. We expect GE to buy these back as soon as possible, given the steep 10% dividend.

Disclosure I am long GE shares.

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