General Electric (NYSE:GE) CEO Jeff Immelt has been bad for shareholders — especially when compared to his predecessor, Jack Welch. As I wrote in September 2006, Immelt was earning a “gentleman’s C” for his performance, with GE’s stock was down 14% since Immelt took over while the S&P 500 was up 25%. As I noted then, Immelt’s excuse was that Wall Street had the “blue chip blues.”

This was a lame excuse — since the stock of 3M (NYSE:MMM), another blue chip run by Immelt’s former colleague and rival Jim McNerney — the subject of my book, You Can’t Order Change — was up 45% under his tenure.

Meanwhile, Jack Welch oversaw nearly two decades of double-digit quarterly earnings growth and a massive boost in shareholder value. Under Welch, GE’s market value increased 5,096%, including dividends. This represents an average annual increase in GE’s shareholder value of 21.3% a year. The S&P 500 increased 1,433% over the same period, or about 14.3% a year, also including dividends.

Is Immelt’s leadership, which has seen the stock fall 40% during his tenure, going to pay off for shareholders? Based on GE’s second-quarter earnings results, it looks like there is a bit of reason for optimism. Its profit was $3.69 billion — up 22% from the year before, while its adjusted earnings of 34 cents a share beat analysts’ estimates. And GE’s $35.6 billion in revenue was 2.7% higher than analysts expected.

GE is the largest conglomerate out there — meaning it owns a grab-bag of businesses with fairly limited activity-sharing among them. Back in July 2007, I met with GE’s CFO and he asked me what GE could do to boost its shareholder value. My response was to sell everything except the infrastructure businesses — like aircraft engines, energy, and locomotives — where GE is selling to rapidly growing emerging markets and has a competitive advantage.

Such a move would entail dumping its other units — including appliances, NBC, and financial services. To his credit, Immelt has partially sold NBC, but he hasn’t been able to find a buyer for GE’s appliances business. The part of GE that makes mortgages and issues credit cards is still sucking up too much capital.

Those infrastructure businesses performed well in the second quarter. For example, GE’s strongest growth came from its railroad locomotive unit, which posted a 74% rise in revenue following a long period of slow growth. Equipment orders climbed 33% as GE introduced more efficient wind and gas turbines, service orders rose 16% percent; and Infrastructure orders increased 24%.

In the last year, GE stock is up 26% compared to 23% for the Dow Jones Industrial Average. Is there reason to think the stock can continue to outperform?

Here are two reasons to buy the stock:

• Low price. GE’s price-to-earnings-to-growth ratio of 0.7 (where a PEG of 1.0 is considered fairly priced) means its stock is cheap. GE’s P/E is 15 and its earnings are expected to grow 22% to $1.67 a share in 2012.
• Dividend. GE’s dividend yield of 3.1% is attractive and it’s been growing at an average annual rate of 3.6% over the last year.

One reason to pause is a mixed longer-term financial track record. GE has suffered from slow growth and declining profit. Its revenue has inched up at an average rate of 1.9% over the last five years and its net income has fallen at a 6.6% annual rate over that period.

The good news is that its balance sheet has been improving. Its cash has risen faster than its debt. Specifically, GE’s cash has risen at a 54% annual rate from $14 billion (2009) to $79 billion (2010) while its debt was up more slowly at an 8.4% annual rate from $261 billion (2009) to $361 billion (2010).

With its low stock valuation and high dividend, it may be worth considering that after a decade, Jeff Immelt is figuring out how to manage GE. If GE keeps beating expectations, its stock could keep rising.

Peter Cohan owns GE shares.