As a Canadian, this dilemma has a serious caveat.
If a Canadian investor wishes to add shares of General Electric Co. to their portfolio they must open a U.S. dollar account and purchase the shares on the NYSE in U.S. currency.
This means that you take the additional currency risk, with respect to the total cash distribution paid out each year, or when you sell all the shares, and convert the money back into Canadian currency (should you choose to do so).
If you want to spend the earnings of your US currency investment inside the states, this isn't a problem
It is still a factor to consider when making an initial purchase (dollar-cost averaging is an applicable strategy that can smooth-out the volatility of currency value, but more transactions also increase the total cost of transaction fees).
If you want to spend the money you earn form your GE shares in Canada you face the additional currency volatility (i.e. if you need money when the value of the Canadian dollar has sunk, it can drastically reduce the buying power of your earnings, hence lower actual cash yield).
taking those factors into account, GE is one of the most diversified, industrial, commercial, media and unfortuantely financial companies in America. The financial hoob-a-joob that took place within that branch of the company has taken the entire corporation to the brink of insolvency.
Fortunately, all major financial institutions in America and around the world are able to borrow money at about zero% and lend it at 5-6%. This is a guaranteed way to keep otherwise bankrupt companies in business during what can be called a mini-depression.
The price of each share was around $25-$35 US ever since it split in 2000. Then in March, when the S&P500 hit 666, it was at about $6.66. Since then, the S&P closed friday at 877 and GE shares were trading at $12.69. The last dividend payment was $0.31 and nobody is sure if it will be maintained or reduced going forward. If you buy the shares on friday, the average yearly cash distribution is (barring a dividend cut) 9.77%.
Can't lie, in the medium term, that is a very, very attractive offer. even if the dividend is cut by 50 or 60%- that's still a good offer, looking at the long-term value of the company (excluding any currency risk).
As an individual investor, look to see if you're willing to go on the roller coaster ride of the future with this company. the value of your capital ($10000-$20000) will be fully put on the line to thrive, survive or decline along with the future prospects for solid revenue growth and the value of the Canadian and US dollars.
If you like what you see, be brave, bold and determined.
Or, if you're just into the idea that instead of taking all the whopping big risks the company has to make for a juicy 9.7% return, you wanted to take an alternate path, providing a great more deal of stability when dealing with the future earning potential of this mammoth and wildly volatile company, avoiding the stock market entirely.
Currently their is a bond issue from GE circulating around most of the retail bond trading desks in Canda. The features of this bond currently are as follows: It matures in june 2014, the original coupon rate was 4.4% and currently is available at 5.3%.
this means that the bond was issued at units of 100 that cost $100 each. your minimum investment is therefore $10000.
But because of all the current global economic uncertainty and decline, investors who sold off their stock (sending the price plummeting an average of 60% from the highs) also sold their bonds, in the belief the company could go bankrupt because of the inherent weakness in the financial arm.
the difference in the sell-off of GE bonds is that the $100 unit price fell to as low as $90 and is currently sitting at around $95 per unit. This means the minimum investment is now $9500, which is why the yield is 5.3% for new investors and still 4.4% for anyone paying $100 per unit.
Also, when the bond matures you will have the additional capital gain. This means your capital will be returned to you in units of 100 that have a value of $100 each. The only reason the cost per unit was reduced was because of investor pessimism. This bond is still A-rated and considered investment grade. The sell-off of the GE Financial bonds was moderate and short compared with the stock. If you invested $9500 originally, $10000 would be returned to you at maturity on top of all the interest payments received before then.
Questions about the future remain, but any bank that can borrow at 0-1% and lend that out at 5-6% is going to make steady money. I also know that my bond payment (guaranteed to be cut only after common shares and Warren Buffets preferred shares) falls in that 5-6% range so it's likely they will be able to make my interest payments untill maturity.
If you feel safe and confident about the company, you press the buy order and the brokerage will transfer the money and you start to receive your payments. You are not dealing with any foreign currency. all of these transactions are available in Canadian dollars.
As the bond investor, if that looks like a good return (about 3% above a similar government of Canada bond) with little to no risk of taking a loss, why take the risk of a big loss just to get the big gain?
money is what you earn, investments are what keep your money safe.