GE’s dividend to be cut in half
›› It’s just the third time the company has sliced its payout in its 125-year history, and it’s exploring “exit options” for Baker Hughes.
General Electric sliced its dividend in half Monday, saving the beleaguered industrial giant $4.2 billion annually as it seeks to regain its footing after more than a decade of lagging profits and poor stock performance.
Shareholders will see their payments on each share drop from 24 cents a quarter to 12 cents, just the third time the company has cut the payout in its 125-year history. The reduction comes as the manufacturing conglomerate put in motion a sweeping overhaul that includes plans to revamp its board of directors and sell off business units, including its storied lighting business that dates back to its founder, inventor Thomas Edison.
General Electric chief executive John Flannery said GE was also exploring “exit options” for its 62.5-percent stake in Baker Hughes, a Houston-based oil services company.
GE has long been one of Wall Street’s biggest dividend payers, behind the likes of Exxon Mobil and Apple. Everyone from individual investors to pensions to foundations have relied for decades on the GE dividend.
“This is about as bad as we had expected, following third-quarter results that were undoubtedly worse than most could have imagined six months ago,” JPMorgan analyst Stephen Tusa said in a note. Tusa has projected that the price of GE shares could fall to $17; shares fell 7 percent Monday to settle at $19.02.
Flannery said the decision was made to bolster the company’s cash holdings. GE’s estimated $7 billion in cash flow this year could not by itself cover the $8.4 billion dividend payout.
He said the company would build its future around its aviation, health care and power segments. It will jettison most everything else. Those other parts include a locomotive business, a large investment in Baker Hughes and GE’s light bulb business.
Emphasizing his belief in the vitality of a smaller GE — and nodding to products like electric generators, jet engines and medical-imaging equipment — Flannery accompanied his presentation with slides that said the company would continue to “power the world,” “transport people safely” and “save lives.”
GE, the only company remaining on the Dow Jones index from the original list, said Monday it will revamp its board of directors, one of the most prestigious panels in American business. It is reducing the number of seats from 18 to a dozen, and three members will be replaced. The board, which has been criticized for letting GE’s value plummet.
The manufacturing conglomerate had long been a pillar of American industry. It has 295,000 employees, competes in 180 countries and enjoyed wide respect for its management and its corporate governance.