GE trims dividend as its new CEO moves to streamline industry giant
General Electric, the nation’s largest industrial company, cut its dividend Monday, only the second time it has done so since the Great Depression.
The company announced before the start of stock trading that it would reduce its quarterly payout by half, to 12 cents a share from 24 cents a share.
The dividend cut is the most emphatic move that John Flannery, GE’s new chief executive, has made since he took over in August. It is part of his broader plan to streamline the company by cutting costs and focusing on fewer businesses.
Last month, when GE reported disappointing financial results, Flannery said the company would sharpen its focus on fewer industrial businesses and shed at least $20 billion in assets over the next two years.
Last year, GE sold its appliance division, including its Roper oven production plant in Lafayette, Ga., to the Haier Group, the world’s biggest home appliance maker, for $5.4 billion.
GE acquired the French power manufacturer Alstom last year for $10.6 billion, but soon after GE closed its Chattanooga operations that dated back more than century.
There may well be more closings and business sales, Flannery said in a presentation Monday. The units to be disposed of, he said, would probably include the lighting, and railway locomotives divisions and an industrial solutions business that sells
energy-distribution and monitoring equipment. Ten smaller assets, which Flannery declined to identify, will also be shed.
Flannery said GE was also exploring “exit options” for its 62.5-percent stake in Baker Hughes, a large oil-field equipment maker.
GE had nearly 300,000 employees worldwide at the end of last year. The impending sales of several businesses and other cost-cutting initiatives will undoubtedly leave it a smaller company.
Yet Flannery portrayed the path ahead not as one of retreat but as one of opportunity, for GE workers and for the company’s investors.
“We will produce results that our owners, and that we, will be proud of,” he said. “This is our time to reinvent the company.”
The move announced Monday reflects the company’s declining cash flow, but it also underscores Flannery’s decision to further pare back GE’s portfolio of businesses. The total dividend payout had been more than $8 billion a year, among the most costly for U.S. corporations. But the cash flow to cover that bill has faltered.
When GE reported its third-quarter earnings last month, it that cash flow for the year would be about $7 billion, down from an initial target of $12 billion to $14 billion.
GE executives emphasized that this year’s cash shortfall was attributable to two businesses — the oil-field equipment unit and its power-turbine business.
Shares of GE stock plunged nearly 7.2 percent, or $1.47 per share, to close Monday at $19.02 — the lowest price in more