We recently compiled a list of the 10 Unstoppable Dividend Stocks to Buy. In this article, we will have a look at where GE Aerospace (NYSE:GE) ranks among other unstoppable dividend stocks to buy.
It’s undeniable that dividends have played a key role in the market’s returns over the past year. While they hit a rough patch for a bit, these stocks still have plenty of room to grow. Their rising significance is tied to the fact that US companies are boosting their dividend payouts, thanks to strong cash flow. Many US firms, particularly in the tech sector, have substantial cash reserves on their balance sheets. Due to this, several major tech companies have introduced dividend policies this year, sparking renewed interest in dividend stocks.
In addition, with the market shifting away from top-performing stocks and the Federal Reserve likely to reduce interest rates, dividend stocks remain a valuable option for investors seeking solid returns. Dan Lefkovitz, a strategist for Morningstar Indexes, also supported investing in dividend stocks this year. Here are some comments from the analyst:
“Investing in dividend-paying stocks is a good way to participate in equities over the long term. There have been long stretches when the dividend-paying section of the market has outperformed. Eventually, they’ll come back into favor.”
When it comes to dividend stock investing, the attention is often split between high yields and dividend growth. Analysts tend to favor dividend growth, as it offers a more reliable income stream. In contrast, high yields can sometimes be misleading, hinting at potential financial difficulties. A report from RBC Wealth Management highlights that high-yield stocks have been lagging behind those with lower yields this year. By July 2024, stocks yielding less than 1% delivered an average return of 18%, significantly outperforming the 0.9% average return of stocks yielding over 3%. The report also mentioned that the Dividend Aristocrats, companies that have raised their payouts for at least 25 consecutive years, have historically performed well both during and after economic downturns. Their success is built on appealing valuations relative to the broader market and business models that have proven durable in the face of economic uncertainty. Currently, these equities are trading at a trailing twelve-month P/E of 24.95, which indicates confidence in the stability and growth of these companies.
Several reports have highlighted that while dividend growth companies might not deliver instant gratification, they provide significant long-term advantages. Nuveen, an Illinois-based financial planning firm, also expressed a positive view on dividend growth strategies this year, noting their strong historical track record. The report emphasized that companies focused on growing their dividends possess qualities that pave the way for solid performance in the future. Over the long haul, companies that consistently boost or introduce dividends have outpaced other market segments, achieving higher annualized returns with less volatility. While they may not always shine in every market condition, their steady, risk-adjusted returns over time make them a cornerstone for any equity portfolio—truly a case of “slow and steady wins the race.” With that, we will take a look at unstoppable stocks that pay dividends.
Our Methodology:
For this article, we first used a stock screener to identify stocks that have reported positive returns in 2024 so far. From this selection, we chose dividend stocks with year-to-date (YTD) gains of at least 30%, as of the close of September 9. The stocks were then arranged in ascending order of their YTD gains.
We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 912 funds as of Q2 2024. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
GE Aerospace (NYSE:GE)
Year-to-Date Return as of September 9: 62.6%
GE Aerospace (NYSE:GE) is an American aircraft engine supplier that offers products and services in aviation and defense engineering. The stock began the year under the name General Electric but has since been renamed GE Aerospace. This name change followed the spin-off of GE Vernova in early April. This successful spin-off attracted investors’ attention and as a result, the stock surged by nearly 63% since the start of 2024.
Artisan Partners appreciated the company’s performance this year and highlighted this in its Q1 2024 investor letter:
“Our holdings in industrials, now our largest sector weighting, added to the portfolio’s outperformance as well. In particular, GE Aerospace (NYSE:GE) stood out as the largest contributor to relative performance this quarter. The storied American company and leader in aerospace, health care, renewable energy and power generation will split into three separate companies next quarter. We are most interested in its aerospace assets, given its growing pricing power in that industry. GE said it expects to increase deliveries of its popular LEAP airline engines by 20% to 25% this year given the escalating demand for air travel. The engine is manufactured by CFM International, a 50/50 joint venture between GE and Safran. Together, they make about 50% of the world’s commercial airline engines. In addition to strong fundamentals and pricing power in aerospace, we are attracted to GE’s clean hydrogen and decarbonization technologies in its alternative energy business, assets that are used to generate 30% of the world’s electricity.The unit benefits from the $435 billion in clean energy funding provided by the Inflation Reduction Act and Infrastructure Investment and Jobs Act.”
GE Aerospace (NYSE:GE)’s business remains robust following the spin-off. It is accelerating efforts and utilizing FLIGHT DECK to address supply constraints and fully meet customer demand. The leadership is confident that by advancing its strategic priorities for the present and future, the company will successfully meet customer needs and deliver significant value to shareholders. In the second quarter of 2024, the company reported revenue of $8.2 billion, which showed a 4% growth from the same period last year. Its total orders were worth $11.2 billion, which saw an 18% YoY growth.
GE Aerospace (NYSE:GE) had its cash well-positioned during Q2 2024. The company reported an operating cash flow of $1 billion and a free cash flow of $1.1 billion, up 27% and 17% on a YoY basis, respectively. The company initiated its quarterly dividends in April, offering a per-share dividend of $0.28. The stock supports a dividend yield of 0.67%, as of September 9.
Insider Monkey’s database of Q2 2024 indicated that 86 hedge funds held stakes in GE Aerospace (NYSE:GE), compared with 95 in the previous quarter. These stakes have a consolidated value of over $12 billion. With over 48 million shares, TCI Fund Management was the company’s largest stakeholder in Q2.
Overall, GE ranks 3rd on our list. While we acknowledge the potential for GE to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.