The severe dividend cut by General Electric was made official on Friday, with the company’s board of directors approving the payout to be reduced to only a cent per share.
GE stated in late October that it would lower its quarterly dividend to 1 cent per share, the company’s second dividend drop this year. One of the numerous reasons the stock has dropped nearly 60% this year is because of this move.
Will GE ever pay a dividend again?
BOSTON, MASSACHUSETTS—(BUSINESS WIRE)—(BUSINESS WIRE)—(BUSINESS WIRE) GE’s (NYSE: GE) Board of Directors today declared a $0.08 per share dividend on the company’s outstanding common stock. The dividend will be paid on October 25, 2021, to stockholders who were on the books on September 27, 2021. The stock will go ex-dividend on September 24, 2021.
When did GE cut their dividend?
GE was in a liquidity pinch during the financial crisis a decade ago. The business lowered its quarterly dividend to 10 cents a share from 31 cents in early 2009 under the leadership of Jeffrey Immelt. On an annual basis, that amounted to more than $8.8 billion, the biggest drop in the S&P 500’s history.
Why did GE cut dividends?
General Electric is in such dire straits that its 119-year-old dividend has been slashed to only a penny a share by its new CEO, Larry Culp.
On Tuesday, GE reported lower-than-expected earnings and a $22 billion accounting writedown for its troubled power segment. Culp intends to split up the power division in order to speed up the turnaround.
The SEC and the Justice Department are examining the accusation, which shows the degradation of firms that GE has bought, according to the corporation. The announcement adds to GE’s escalating legal woes, sending its stock tumbling by 9% to a nine-year low. Since March 2009, this was GE’s worst day.
In an effort to improve GE’s debt-ridden balance sheet, Culp said that the company’s quarterly dividend will be reduced from 12 cents per share to 10 cents per share beginning in 2019. GE (GE) will save around $3.9 billion per year by paying only a tiny dividend.
Analysts had predicted a possible dividend decrease, but not one this significant.
It’s a particularly difficult move for a corporation that has long taken pride in its consistent dividend. Years of poor judgments, however, caused GE to reduce its dividend for the first time since the Great Depression in November of last year. The dividend reductions are a setback for many GE retirees and small-business owners who have long relied on the beloved handouts.
In a statement, Culp added, “We are on the right track to build a more concentrated portfolio and strengthen our balance sheet.”
“This is not a quarter that we’re especially proud of,” Culp, who was unexpectedly chosen CEO on October 1, admitted on a conference call.
The fact that GE did not even provide guidance for the fourth quarter or 2019 may have alarmed investors.
“There was no resetting of the clock.” They didn’t even tell you how much money they’ll make or how much cash they’ll have. “They really don’t know,” said Gordon Haskett analyst John Inch.
GE’s cash troubles
Because the US economy is flourishing, dividend cutbacks are extremely rare these days. The majority of corporations are increasing their dividends as a result of the tax cuts. According to Howard Silverblatt of S&P Dow Jones Indices, at least 291 S&P 500 companies have increased their dividend this year. As of early October, only two S&P 500 businesses had decreased their dividends, according to Silverblatt.
“CFRA analyst Jim Corridore said to clients, “We view the move courageous and important, and a sign that Mr. Culp would not take half measures to strengthen the company.”
GE, on the other hand, made a concerted effort to silence calls for the business to bolster its balance sheet by selling stock. According to some analysts, GE Capital requires a multibillion-dollar liquidity infusion.
“Let me declare unequivocally that we have no intentions for an equity offering,” Culp said to analysts.
Power problems deepen
GE’s power segment is still the company’s major cause of difficulty, drowning out the company’s aviation business. Last quarter, GE Power’s revenue fell by 33% “Continued market and execution issues” are to blame. The division suffered a $631 million loss, compared to a profit of $464 million the previous year.
The difficulties in power, according to Jamie Miller, GE’s chief financial officer, will only become worse “persist for longer and have a greater impact” than was previously anticipated. As a result, GE expects to miss its full-year profitability and cash flow forecasts by a significant margin.
“JPMorgan analyst C. Stephen Tusa, Jr. wrote to clients, “Power is terrible and not near as recoverable as Bulls imagine.”
The shift away from coal and gas in favor of renewable energy has caught GE Power, which builds turbines for power plants, off guard. GE doubled back on fossil fuels under previous CEO Jeff Immelt, spending $9.5 billion in 2015 to acquire Alstom’s power division. The deal was a flop, as evidenced by the $22 billion goodwill impairment charge recorded in the fourth quarter.
On Tuesday, GE said that it will split its power business into two companies, one focused on natural gas and the other on steam, nuclear, and other assets. And Culp, who was known at Danaher for running a tight ship, has big intentions “GE Power’s headquarters structure will be consolidated.
Culp indicated that he supports previous CEO John Flannery’s proposal to further disassemble GE by spinning off the health-care sector and selling the company’s majority share in oil and gas firm Baker Hughes (BHGE). GE expects to sell its Baker Hughes interest, according to Culp “over several years, in a systematic manner.” Despite his background in health care, Culp believes it is ideal for health care to be self-contained.
Culp also dismissed rumors that he could reshuffle GE’s executive positions. “I’m pleased with the group we have here, and we’re committed to making General Electric a stronger company,” he said.
Will GM reinstate dividend?
GM has failed to return its dividend, which was halted in April 2020, despite CEO Mary Barra’s statement last November that the firm plans to resume payouts “about mid-2021.” Barra indicated she would defer remarks on the dividend plan when asked about it again in a February earnings call.
What is the current GE dividend?
As of December 02, 2021, the TTM dividend payout for General Electric (GE) is $0.32. The current dividend yield for General Electric is 0.34 percent as of December 02, 2021.
How often do you get dividends?
What is the frequency of dividend payments? Dividends are normally paid quarterly in the United States, while some corporations pay them monthly or semiannually. Each dividend must be approved by the board of directors of the corporation. The corporation will then announce when the dividend will be paid, how much it will be, and when it will go ex-dividend.
Will next pay a dividend in 2021?
NEXT plc’s board of directors declared a special dividend of 110 pence per share, payable on September 3, 2021, to shareholders who were registered at the close of business on August 13, 2021. From August 12, 2021, the stock will trade ex-dividend.
Is GE a buy 2020?
General Electric is making headway on its long-term turnaround plan. As the airline sector and the larger economy progressively recover from the epidemic, GE earnings and cash flow are likely to increase further in 2021.
Furthermore, General Electric is about to undergo a major makeover, abandoning its diverse background in order to focus on aviation.
Many Wall Street analysts are optimistic about GE’s present management and improving fundamentals. Others, on the other hand, remain on the sidelines. GE is also a member of a trailing industrial group.
GE stock is currently trading at 115.30, which is a good buy point. However, the stock remains below the entry point, and the RS line is underwhelming.
Buying an index fund, such as SPDR S&P 500 (SPY), would have provided better long-term returns than GE shares. If you’re looking for a large-cap stock to invest in, IBD has a few good suggestions.
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