General Electric Cuts Dividend in Half

An announcement was made by General Electric Co. on Monday, saying that it will be cutting its dividend in half.

The move, as seen by analysts, has the possibility of causing a lot of long-time shareholders in the 125 year-old conglomerate to flee. But it can also be a way to free much needed capital which can be used to fund a turnaround for the one-time American bellwether.

GE stated that from 24 cents a share, it will be cutting its quarterly payout to 12 cents starting on December. This news caused shares to rise more than 2 percent during the premarket trading, compared to the more than 35 percent down for the year.

GE Chairman and CEO, John Flannery, said in a statement that the importance of the decision to their shareholders has been taken into great consideration before being finalized and made public. “We are focused on driving total shareholder return and believe this is the right decision to align our dividend payout to cash flow generation,” he added.

Hints were dropped by Flannery during the release that there might be more changes to be announced during the company’s investor’s day at 9 A.M. ET.

Before Monday’s announcement, and during the time GE’s shares centered, the business’ dividend yield swelled to the second highest in the Dow, right behind Verizon, at 4.7 percent (Verizon’s yield is 5.3 percent).

The swell caused many analysts to speculate that the payout was unsustainable, which, according to them, helped explain why the stock was stable in early trading as the decision has been expected for so long.

The new dividend yield is seen to be at 2.3 percent.

GE’s Three Points

GE CEO John Flannery stated that he plans to reveal a road map for the company by Monday which will focus on three of its biggest, major business lines, which are aviation, power and healthcare.

A report also said that the plan only stops short of a breakup or more drastic restructuring of the 125-year old company, but that Flannery will look to exit most of the other operations.

The Boston-based company is also planning to drop- its majority stake in Baker Hughes. The latter became a separate public company back in July after it merged with GE’s oil and gas operations.

GE was not immediately available for comment outside of its business hours.

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