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General Electric: Much Ado About Nothing? -- Barron's Blog
DOW JONES & COMPANY, INC. 10:02 AM ET 7/19/2017
Symbol Last Price Change
GE 26.89up 0 (0%)
QUOTES AS OF 10:02:56 AM ET 07/19/2017
General Electric (GE) ( GE) once claimed to bring good things to life, but these days it feels more like its best at creating angst among investors. But are stock investors worrying too much?

They just might be, if the options and fixed-income markets are to be believed. Yes, shares of General Electric(GE) have dropped 15% so far this year, as investors worried about the industrial giant's earnings quality, its dividend and even the future of its business. The Industrial Select Sector SPDR ETF ( XLI) has gained 11%, and the S&P 500 has risen 10%.

Other markets take a much less dismal view, say RBC analyst Deane Dray and team. They explain:

Over the past year, GE has become one of the most contentious battleground stocks in the Multi-Industry sector. Among the debate flashpoints are its cash flows, earnings quality, and the sustainability of its robust dividend, given its sector-high 3.6% yield and elevated 60% payout ratio. We thought it would be instructive to look outside the equity markets for any insights that can be gleaned from the fixed income and derivatives markets. Any broader concerns over GE's liquidity and cash flow position would likely be evident in widening spreads for GE's corporate bonds and credit default swaps (CDS), along with signals in GE options pricing. The bottom line is that these markets are essentially signaling no change in the dividend for 2018, though 2019 remains a bit uncertain. In addition, CDS and bond spreads have tightened over the past year, signaling a constructive credit outlook overall.

Shares of General Electric(GE) are little changed at $26.88 at 9:57 a.m. today, while the Industrial Select Sector SPDR ETF has declined 0.2% to $69.10.

More at Barron's Stocks to Watch blog, http://www.barrons.com/stocks-to-watch