General Electric Blues

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 ultra-safe, 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.