General Electric Co., New York symbol GE, plans to buy back all of the preferred shares it sold to Berkshire Hathaway Inc. (New York symbol BRK.B), the holding company controlled by billionaire investor Warren Buffett.
GE sold these shares to Berkshire during the 2008-2009 financial crisis. The cash from the sale helped stabilize GE’s finance division.
The company will pay $3.3 billion to buy back these shares. That’s nearly equal to the $3.5 billion, or $0.33 a share, that GE earned in the three months ended June 30, 2011. However, this purchase will save the company $300 million a year in dividend payments.
Blue chip stocks: Order backlog for GE reaches record proportions
In the quarter ended June 30, 2011, GE Capital’s earnings jumped 117.0%, to $1.6 billion from $734 million a year earlier. That played a large part in pushing up the company’s overall earnings to $3.5 billion. A year earlier, it earned $3.2 billion, or $0.29 a share.
Revenue fell 3.5%, to $35.6 billion from $36.9 billion. However, that’s partly because the company sold 51% of its NBC Universal entertainment business in February 2011. If you exclude the impact of this sale, revenue from this blue chip stock’s ongoing businesses would have risen 7%.
GE’s order backlog is now a record $189 billion, or 1.3 times its annual revenue.
We updated our advice on GE and other blue chip stocks in our September 16, 2011, Wall Street Stock Forecaster hotline, You can view it immediately view when you take a 1-month free trial to Wall Street Stock Forecaster, our newsletter written especially for Canadians interested in U.S. stocks with a substantial margin of safety. Click here to get started right away.
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