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GE Makes Move It's Only Made Once Since the Depression

Company slashes dividend as part of a major restructuring; stock has worst day since 2009
By John Johnson,  Newser Staff
Posted Nov 13, 2017 1:33 PM CST
Updated Nov 13, 2017 3:28 PM CST
GE Makes Move It's Only Made Once Since the Depression
The General Electric logo appears above a trading post on the floor of the New York Stock Exchange.   (AP Photo/Richard Drew, File)

(Newser) – General Electric announced big moves on Monday as part of a strategy to streamline the struggling company, including a rarity: GE is slashing its dividend for only the second time since the Great Depression, reports the New York Times. And it's no small cut, with the quarterly payout shrinking by half from 24 cents to 12 cents a share. As CNN Money notes, GE is one of the nation's most widely held stocks, and "countless shareholders, including retirees, rely on the dividend payments." The cut, then, is a sign of how dire things are, and the idea is to free up money to help with the company's transition into a leaner entity, says new CEO John Flannery. Details and developments:

  • Smaller focus: GE plans to zero in on three main industries—aviation, health care, and power, reports the Wall Street Journal. Think jet engines, medical imaging equipment, and generators. It will shed other subsidiaries and lay off 25% of its corporate staff, or about 1,500 jobs at its headquarters in Boston. The board is shrinking from 18 to 12 members.
  • No more lighting? The historic lighting unit is among those likely to be pared, though final decisions await, reports the AP. In all, GE plans to shed $20 billion worth of units in the near future. The railway locomotives unit also is expected to go, and the company may ditch its newly purchased stake in oil and gas giant Baker Hughes.
  • Worst day in years: Shares fell 7.2% on the news, making for GE's worst day on the market since 2009, reports CNBC. The stock was trading at a shade over $19 at the market's close.

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  • Rough year, decade: GE stock already was down about 35% this year heading into Monday, making it the worst performing Dow component of 2017, reports Reuters. It's no fluke: "Since September 2001, when recently retired Chief Executive Jeff Immelt took over, GE stock has effectively been dead money, posting a negative total return even after reinvesting its juicy dividends."
  • Cramer's regret: Analyst Jim Cramer, whose charitable trust owns GE stock, calls that investment "one of the biggest mistakes of my career," per CNBC. "I did not know how bad things were. Few people did."
  • Will it work? Flannery said all the right things and seems to have a grasp on the big-picture problems, per an analysis at the Wall Street Journal. Former CEO Immelt also tried a corporate restructuring, but "the difference here is that Mr. Flannery has laid out a clear plan by which investors can judge his progress. He will have to proceed quickly, though, while maintaining a delicate touch." In the meantime, it's understandable for investors to be skeptical.
  • Caution advised: A post at Seeking Alpha assesses all this and advises investors to hold off before scooping up GE stock. "We think it is far too early to be going in and 'buying the turnaround' just yet." The site also expects the share price to sink below $18 soon.
(Read more General Electric stories.)

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