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General Electric is slashing its coveted stock dividend in half and getting even smaller by selling storied businesses such as its railroad and light bulb units.
The dividend cut, only GE's second since the Great Depression, shows the depths of the iconic company's financial problems.
GE - GE - America - Stocks - Shareholders
GE (GE) is one of America's most widely held stocks, and countless shareholders, including retirees, rely on the dividend payments. But the company is under enormous pressure to restore investor confidence shaken by a serious cash crunch.
The stock has lost 40% of its value this year. GE plunged 8% on Monday, to the lowest level in five and a half years, after the company announced the restructuring and diminished financial targets. The new dividend will be 12 cents a share, down from 24 cents.
GE - Dividend - Payers - United - States
GE had been one of the biggest dividend payers in the United States, behind giants like ExxonMobil (XOM), Apple (AAPL, Tech30) and Microsoft (MSFT, Tech30).
By cutting the dividend in half, GE will save more than $4 billion per year. That makes it one of the largest dividend cuts in the history of the S&P 500 and the biggest since 2009, according to S&P Dow Jones Indices.
GE - Dividend - Cut - Great - Recession
GE made an even bigger dividend cut in 2009, during the Great Recession. But dividend cuts are rare these days. Many companies are increasing them because the U.S. economy is healthy and the stock market is booming.
The problem for GE is that it's not making enough money to cover its dividend payments. Free cash flow, which measures how much cash is being generated after investing in the business, has deteriorated for six straight years.
Dividend - Cut - % - GE - Cash
Even after the painful dividend cut, about 85% of GE's estimated free cash flow will go toward dividend payments, according to JPMorgan. That's well above rivals like Honeywell (HON) and United Technologies (UTX) and speaks to...
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