General Electric Co. climbed to the highest price in more than nine months after the Federal Reserve’s bank stress tests boosted investor confidence that the company’s finance unit can resume a payout this year.
GE, which wasn’t one of the 19 financial institutions subjected to the tests, climbed 1.1 percent to $19.79 at 4 p.m. in New York, the highest since May.
Some bank holding companies increased share buybacks and dividends to 70 percent or more of analysts’ 2012 profit forecasts as the Fed released test results, suggesting GE’s plan to resume taking a payment of 40 percent to 50 percent of GE Capital’s earnings isn’t “an aggressive bar to clear,” C. Stephen Tusa, a JPMorgan Chase & Co. analyst, said in a note.
GE is waiting for the Fed, which took over as its regulator last year, to finish its evaluation of GE Capital before restarting the dividend. The company is targeting a payout from GE Capital of 45 percent of profits, Chief Financial Officer Keith Sherin said on a Jan. 20 conference call with investors.
“They are our regulator and we continue to work with them on the oversight and dividend discussion,” Russell Wilkerson, a GE Capital spokesman, said in an e-mail. “Our capital ratios are strong and compare well.”
The stress-test results are a positive for Fairfield, Connecticut-based GE, Julian Mitchell, an analyst at Credit Suisse Group AG, wrote in a note to clients.
“The increased capital return announcements from JPMorgan and others alongside these results, suggest that GE Capital will be allowed to resume a dividend” later this year, Mitchell said.
The payment of almost half of GE Capital’s earnings reached as much as $8.6 billion before it was suspended after the 2008 financial and economic crisis.