Polliesdividend

General Electric decimated its dividend

Every dividend decrease hurts!

Almost one year ago General Electric (GE) appointed a new CEO, John Flannery, who came up with a new turnaround plan for this 125-year-old conglomerate. A dividend cut of 50% was part of this plan. For more information just read my post (General Electric slashes its dividend) from last year.

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Another CEO

However, this plan didn’t work out that good. GE appointed a new CEO again (Larry Culp) and you guessed it, he also decreased the dividend. Decreased isn’t the good word for it, he decimated it! The dividend is lowered to 1 cent. This is was GE announced on October 30thin its press release.

GE Chairman and CEO H. Lawrence Culp Jr. said:


After my first few weeks on the job, it’s clear to me that GE is a fundamentally strong company with a talented team and great technology. However, our results are far from our full potential. We will heighten our sense of urgency and increase accountability across the organization to deliver better results.

We are on the right path to create a more focused portfolio and strengthen our balance sheet. My priorities in my first 100 days are positioning our businesses to win, starting with Power, and accelerating deleveraging. We are moving with speed to improve our financial position, starting with the actions announced today. I look forward to updating you further on our progress in early 2019.”

With a dividend of $0.01, GE symbolically did not break the tradition that the firm had consistently paid dividends every year for the past 119 years. This is still a great achievement. Yes GE has paid a dividend since 1899, but is also had to cut it three times: in 1939, 2009 and in 2017.This new dividend cut, their fourth in more than a century, hurts!!!

 

Ouch!

This dividend cut allows GE to retain approx. $3.9B of cash per year compared to the prior payout level. With this money GE will be able to strengthen its balance sheet and position its businesses for success.

The shares are down for more than 40 percent for this year and almost 75% since January 1st2017. Ouch!

Yes, this really hurts (I’m almost $825 down from my original investment of $1,600), but I see a little silver lining: Management has finally come to realize the full extent of their issues and are, thanks to new leadership at the top, prepared to do what’s needed to bring the business back from the precipice it has dangled over for so long.

 

Vrijheid Fonds

My Vrijheid Fonds consist of 60 shares of GE. This dividend cut will be first felled in January 2019.  My total dividend loss for 2019, due to the GE dividend slash, is approx. €19.

As already stated, this cuts really hurts. And I had high expectations of last year’s plan. But that didn’t worked out. When I look at the numbers, I think it is better to sell GE and buy back a good Dividend Aristocrat. Last year I wrote that I was thinking about what to do with my shares of GE. I probably waited too long (learning point).

Do you own GE? What is your action after they announced the decimation of their dividend?
I like to hear from you.

Cheers,

Pollie

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7 thoughts on “General Electric decimated its dividend

  1. DutchIndependence

    It’s quite the dilemma, do you wait with selling as you’ve waited too long already maybe, or do you move on. I can only imagine how hard the decision must be. Good luck with deciding Pollie!

    DI

  2. Financial Shaper

    I completely agree, a dividend cut really hurts. As dividend growth investors we love dividend hikes.
    I experienced two dividend cuts during the commodity price crash a few years ago, Rio Tinto and BHP Billiton slashed their payout. I kept my stock, reinvested the „mini dividends“ and it showed that it was good to keep the shares, the industry and businesses recovered quite nicely.
    With regard to GE it is very obvious, that they have 100 % homemade problems. We are in a boom phase, such a company should prosper in such times, but clearly the opposite is the case. Just thinking if we had a recession.
    I am no shareholder of GE,too many
    moving pieces for my taste currently.
    But it is of course well possible that the company can not only survive but also prosper in future

    All the best!

    Financial Shaper

  3. Ralf

    I also have GE. Yes, last year I believed in the plan that management would handle it better. The cut in the dividend does away, and makes up a net of around € 200 a year for me. But I am convinced that we will have a turnaround in the next 3-5 years. If there is a constant bottoming out of the chart, taking into account the news and numbers, I will increase my stock of GE to lower the EK.

    1. Pollie Post author

      I agree that last years plan gave confidence. But this latest dividend cut, mad me pull my sell trigger. I don’t believe that my loss will be gone within the next 3 till 5 years. I can let my money work better for me with another company

  4. Get Rich Brothers

    Hey Pollie,

    Yeah, that GE dividend cut is one that is stinging a lot of investors. I don’t own any myself but my brother did get involved at some point along the way. Hoping for everyone’s sake they can get things back on track.
    That said, I do have to admit that the company is interesting as a turnaround play. Around $5-6 I would consider getting involved as well, though that would be subject to other opportunities available at that time.

    Take care,
    Ryan

  5. Cntrysky

    Good article. Wow. I figured that was the reason for leaving the dividend active at least to a penny – the long history. I’m in the same situation with an IPO I went in on. Dropped 60 or so percent but the leftover value – makes me wonder if it is really worth cashing out. I’m willing to just let it Ride. IPO was Switch.

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