General Electric Company (GE) Vs Two Alternatives

General Electric vs. GlaxoSmithKline plc (ADR) (NYSE:GSK)

Another dividend stock pick of Warren Buffett is GlaxoSmithKline plc (ADR) (NYSE:GSK) . GlaxoSmithKline paid a higher annualized dividend compared to General Electric. Just like General Electric, the payout amount is also increasing year over year. In 2010, the annualized dividend of GSK was $1.9987. In the following year, the annualized dividend was increased by 10% to $2.2057 per share. Another increase was seen in 2012 to $2.4773 per share with 12% dividend growth.

GlaxoSmithKline is a financially stable company with a solid market capitalization of $126.45 billion. The P/E ratio of GSK is 19.08, while its ROE is notably higher than General Electric’s at 51%. Its revenue for the first quarter was $42 billion and its net income stood at $6.78 billion. GlaxoSmithKline ‘s profit margin was 16%, but its quarterly earnings growth is -26%.

Summary

Among the mentioned names, GlaxoSmithKline has the highest yield at 4.3%. General Electric comes next with 3.6% yield, while General Dynamics has yield of 3%. GlaxoSmithKline is a relatively more defensive stock compared to General Electric, as the healthcare sector is more resistant to global economic downturns. This makes it an ideal investment for conservative investors.

On the other hand, General Electric could be a good play to invest in global economic recovery. While its yield is lower than that of GlaxoSmithKline, General Electric’s dividend growth rate is substantially higher. If the growth rate is maintained, General Electric will have similar dividend returns in the near future. Also, General Electric got more ‘strong buy’ ratings from the analyst firms. I think General Electric has shown an incredible turnaround since the financial crises, and is likely to keep its performance in the next few years.

The article General Electric versus Two Alternatives originally appeared on Fool.com and is written by Nur Tarkak.

Nur is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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