Corporate News Blog – GE’s Plans to Reduce its Quarterly Dividend Payout by 50% as Part of Organization Restructuring

Research Desk Line-up: Zebra Technologies Post Earnings Coverage

LONDON, UK / ACCESSWIRE / November 15, 2017 / Pro-Trader Daily takes a look at the latest corporate events and news making the headlines for General Electric Co. (NYSE: GE), following which we have published a free report that can be viewed by signing up at http://protraderdaily.com/optin/?symbol=GE. The Company announced November 13, 2017, that the Company’s Board of Directors has decided to fix its projected quarterly dividend payout at $0.12 per share starting from the next dividend cycle, i.e. from December 2017 onwards. The announced dividend payout is 50% less than the current quarterly dividend of $0.24 per share paid by the Company and is in-line with the Company’s expected cash flows. For immediate access to our complimentary reports, including today’s coverage, register for free now at:

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The Company has said that to achieve its long-term goals, it must improve its cash flows. This would be done by aggressive cost-cutting including the slashing of returns to shareholders which would help the Company use the funds in initiatives like research and development (R&D) which would play an important role in future growth of the Company. The dividend of $.48 per share is a 60% to 70% payout ratio of the Company’s estimated free cash flow of $6 billion to $7 billion in FY18.

This is only the second time that GE has cut its dividend since 1938. GE last cut its dividend in 2009 during the financial crisis.

Commenting on the matter, John Flannery, Chairman and CEO of GE, said:

“We understand the importance of this decision to our shareowners and we have not made it lightly. We are focused on driving total shareholder return and believe this is the right decision to align our dividend payout to cash flow generation. The dividend remains an important component of GE’s capital allocation framework. With this action and others that we will be discussing this morning, we are acting with urgency to make GE simpler and stronger to drive growth and create more value for our shareowners.”

Investors disappointed

GE’s announcement of reduction in dividend immediately impacted the Company’s share price which tumbled 7.17% and closed at $19.02 on November 13, 2017. GE’s shares have already fallen nearly 35% in the current year on a year-to-date basis which is the worst in the Dow Jones Industrial Average. Many investors had stuck with the Company’s shares despite the poor performance by the Company just for the dividend pay-outs. The case is especially worse for those shareholders, including retirees, who have invested in the Company and rely on the quarterly dividend payments.

Part of Company’s Restructuring Plan

Since his taking over as the CEO of GE in August 2017, John Flannery has been under tremendous pressure to bring GE back on track and gain investor confidence. He has been taking several steps in this direction including sale of Industrial Solutions and proposed sale of the locomotives and industrial lighting businesses. GE is also considering the sale of its 63% stake in Baker Hughes. He also announced a cost-cutting plan with a target of $1 billion in FY17 and $2 billion in FY18. During the investor conference in New York on November 13, 2017, he shared his plans for the Company’s growth. His restructuring efforts are aimed at making GE a highly focused industrial Company with unmatched global scale and strength in technology, services, additive, and digital. Some of the steps taken by the Company as part of the restructuring initiative include the following:

Rejigging of GE’s Business Portfolio which will be focused on businesses that have the best growth potential. The Company’s focus will be on power, healthcare, and aviation business, which are expected to contribute positively to the Company’s cash flows and increase overall returns;

Plans to divest from non-core or smaller businesses valued nearly $20 billion over the next two years. The Company is considering strategic alternatives for its Transportation and Current businesses including other smaller units;

Sale of its business is also expected to lead to layoffs, however, the Company has not provided any details on the number of job cuts or which business or which offices/ units will be affected;

GE is adopting better financial metrics so that it is easier to link to interpret connections between earnings, growth, and cash flow;

GE is planning on making changes to its top management and major changes in Executive compensation to make executives more accountable. In order to achieve this the Company is planning to make changes in the composition of the executive compensation which has a higher percentage of equity and link it to performance;

The Company is also reducing the number of Board members from 18 to 12 and inducting three new members for fresh ideas and perspective.

Last Close Stock Review

On Tuesday, November 14, 2017, General Electric’s stock closed the trading session at $17.90, dropping 5.89% from its previous closing price of $19.02. A total volume of 311.80 million shares were exchanged during the session, which was above the 3-month average volume of 61.72 million shares. Shares of the Company have a PE ratio of 20.86 and have a dividend yield of 5.36%. The stock currently has a market cap of $155.10 billion.

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