How to Invest in General Electric (GE)

General Electric (GE 0.68%) -- also known as GE -- has been in business for over 130 years and has ongoing operations, primarily in energy and aerospace. Investors are often attracted to the company because it does business in stable markets, including as a defense contractor. But it also has exposure to more exciting growth markets, like renewable energy.

How to buy

How to buy General Electric stock

Let's go over the various aspects of General Electric's business, its financials, and whether it could make a good addition to a diversified stock portfolio.

Step 1: Open a brokerage account

The first step to investing in stocks, including General Electric, is to open a brokerage account. These days, this usually means opening an online brokerage account that offers trading with zero fees and no account minimums. Most brokerages are comparable, so I usually recommend that investors find a brokerage with a user interface that makes the most intuitive sense to them.

Step 2: Figure out your budget

The second step to investing is also personal: a budget. First, investors must determine their overall investing budget. As a general rule, investors shouldn't allocate money they might need within the next five years to the stock market because returns can be volatile. Second, investors should divide the overall budget into about 25 pieces to avoid investing too much money in a single idea.

Step 3: Do your research

Third, investors need to research their various investment ideas properly. Using General Electric stock as an example, one would want to understand how the aerospace and energy markets generally work.

One might also want to know how General Electric's various spin-offs impact shareholders (more on that in a moment). And it would be good to see how management has allocated capital over the last several years to establish a pattern.

Step 4: Place an order

Finally, once the research is complete, investors can place a trade in their brokerage accounts. The screenshot below shows everything needed to buy a stock in a Fidelity account.

As pictured above, investors need to select the account they're trading from, the symbol of the stock they wish to trade (in this case, GE), whether they want to buy a specific number of shares or trade a dollar amount, and whether the trade is at going market prices or a specific price.

If it's the latter, a limit order, the stock might not immediately hit the target price. So, investors would need to additionally clarify whether the order is good only for that trading day or should remain open until canceled by the account's owner.

Should I invest?

Should I invest in General Electric stock?

Investing is personal, so there isn't one right answer when deciding whether to invest in General Electric stock. To best answer this question, investors must be familiar with the business and decide whether it fits their investment style and portfolio needs.

Looking at General Electric's business, it was once an enormous conglomerate with business operations in wildly different industries throughout the world. It was far more than just electricity, despite what the name might imply. Over time, however, it's divested certain businesses, closed others, and even spun some out into their own publicly traded companies, such as GE HealthCare (GEHC 0.34%) in 2023.

General Electric maintains two primary parts of its company: its aerospace and energy divisions, the latter of which includes renewable energy operations. In the second quarter of 2024, the company intends to split into two publicly traded stocks along these lines. GE Aerospace will retain the GE ticker symbol; GE Vernova will get the energy assets and trade under the ticker symbol GEV.

Not only does General Electric have two main business segments, it also generates revenue in two ways. First, it sells equipment. In its aerospace segment, this includes its CFM LEAP engines -- made in a joint venture with Safran (SAFRY 0.15%) -- used by Airbus and Boeing (BA 0.25%). In the energy space, the equipment includes turbines for generating renewable wind energy.

Second, General Electric generates revenue from services provided to support its equipment. This is actually the bulk of the company's revenue, accounting for roughly 56% of its total revenue through the first three quarters of 2023.

General Electric's business benefits from great revenue visibility. It often has a very healthy backlog of equipment orders it's working through, allowing management to predict manufacturing needs years in advance. Moreover, it signs long-term service contracts, meaning its remaining performance obligations (RPOs) for services also stretch years into the future.

General Electric's business could be a good investment option for investors who like stability, profitability, and visibility into the future. And investors don't have to choose between GE Aerospace and GE Vernova today. Shareholders of General Electric will own both after the spin-off.

Beyond just its business operations, General Electric has valuable assets, including its investment portfolio. As of the third quarter of 2023, General Electric had equity interests in GE HealthCare and AerCap Holdings (AER 0.36%), totaling roughly $7 billion in value.

Over time, the company could sell these stakes, bringing in cash for the company to use elsewhere. This is what it did in the recent past with its previously multibillion-dollar stake in Baker Hughes (BKR -1.38%).

Profitability

Is General Electric profitable?

General Electric is a profitable company and has been for decades. However, its profitability needs additional context to be helpful to investors.

Multiple things can affect General Electric's net profit, including changes in the value of its equity portfolio. So, it might be better to look at the company's operating profit, which looks at business operations in isolation.

Over the past decade, General Electric has averaged an operating margin of about 5%. However, the company's profits have improved in 2023 thanks to better discipline regarding its prices when signing long-term deals and which jobs it signs up for in the first place.

A big loss leader for General Electric is its offshore wind business. In 2023, the company expects $1 billion in losses for these operations. It's also still working through a $6 billion backlog of offshore wind business that will also have challenged economics.

That said, General Electric is improving when it comes to its unprofitable and low-profit ventures. It also has other parts of the business that have better margins, consistently leading it to overall profitability.

With its positive cash flows (and by raising cash from selling its equity positions and spinning off certain businesses), General Electric's management has allocated capital in several ways. The company has repurchased shares, pays a dividend, and has reduced its total long-term debt -- all of which help boost shareholder value.

Dividends

Does General Electric pay a dividend?

Yes, General Electric pays a dividend and has for a long time. However, its dividend history has been somewhat inconsistent since the Great Recession.

In 2009, General Electric reduced its dividend because its financial division was struggling. The dividend gradually recovered until the company drastically reduced the dividend again in 2018. Along the way, General Electric spun off portions of its business, which affects how much it has for dividend payments and its share count for dividends.

Still, General Electric has paid a dividend every year for over 30 years, even if the quarterly payments have gone up and down. Its quarterly dividend was $0.08 per share as of Nov. 14, 2023.

ETF options

ETFs with exposure to General Electric

For people who like General Electric but are still uneasy about picking a single stock like this, exchange-traded funds (ETFs) offer a compelling alternative. Rather than pick one stock, these funds offer a collection of stocks based on particular themes.

The Invesco Aerospace & Defense ETF (PPA 0.56%) is one of the top ETFs for defense contractors. And General Electric stock occupies a prominent place in this portfolio. The company has contracts with the U.S. military and militaries from other countries. As of November 2023, General Electric stock was the fifth-largest position in this ETF, with a 5.3% weighting.

Another option for investors is the ProShares S&P Kensho Cleantech ETF (CTEX 3.35%), which focuses on clean energy. General Electric has a large wind energy business and, thus, figures prominently in this portfolio as well. As of November 2023, it was the second-largest position in the ETF, with a 5% weighting.

Stock splits

Will General Electric stock split?

Investors can't predict the future, and it's possible that General Electric stock could split eventually. However, it's very unlikely to happen anytime soon for one simple reason.

In 2021, General Electric stock underwent an 8-for-1 reverse stock split -- for every eight shares investors held before the reverse split, they held just one share afterward. This move greatly reduced the outstanding share count and boosted the stock price.

As of this writing, General Electric stock is up about 45% from where it traded immediately after the reverse stock split. Splitting the stock now would undo some of what management was trying to accomplish with the reverse stock split. In short, the price per share would likely need to rise much higher before management would consider splitting the stock.

Related investing topics

The bottom line on General Electric

General Electric's major business operations are in aerospace and energy. The company sells equipment for each of these industries and provides ongoing services to support its installed base of hardware. A large backlog of business provides visibility into the future, and its prospects appear stable and growing.

Management has also made many shareholder-friendly moves in recent years. For all these reasons, GE is a blue chip stock for investors to consider.

FAQs