Why GE is struggling

Q

I saw that General Electric just cut its dividend. What’s going on? — G.L., Norwich, Connecticut

A

General Electric has been struggling in recent years; it was even removed from the Dow Jones Industrial Average, where it had held a position ever since the index was created more than a century ago. It sliced its dividend in half last year and has now slashed it by 92 percent, to just a penny — presumably to avoid interrupting its 119-year dividend-paying streak.

The dividend cut is part of a plan to strengthen GE’s balance sheet. The company also aims to split its GE Power unit into two pieces — and to spin off its GE Healthcare business, which should command a steeper valuation.

Its recent third-quarter earnings report featured plunging earnings, adding to many investors’ concern. But GE still posted more than $1 billion in free cash flow for the quarter, and its aviation segment has a massive backlog because of rising global demand for air travel.

All is not lost for GE investors, but a turnaround will take time. In the meantime, the stock is a great reminder that well-respected companies can fall on tough times, and dividends don’t always grow.

Q

What are “government securities”?

— R.T., Kenosha, Wisconsin

A

They’re bonds that a government sells in order to raise money. In the U.S., they include Treasury bills (maturing in a year or less), notes (maturing in one to 10 years) and bonds (maturing in more than 10 years). As they’re backed by our government, they’re viewed as ultrasafe, with little risk of default — which is why they can offer relatively low interest rates. You can buy or sell Treasuries via many brokerages, or at TreasuryDirect. gov.