GE slashes quarterly dividend by two-thirds

Bought GE at around $10 holding for the dividend and little appreciation in the stockwhoops!!!!!!!!!!!!!!!!!!!!!!!GE slashes quarterly dividend by two-thirds
Move should save about $9 billion a year; cash to weather the storm
By Christopher Hinton, MarketWatch
Last update: 4:20 p.m. EST Feb. 27, 2009Comments: 73NEW YORK (MarketWatch) -- Economic bellwether General Electric Co. slashed its quarterly dividend by nearly 68% Friday in a move to save its investment-grade credit rating, reversing a 31-year trend of annual increases to its payout.
The Fairfield, Conn., conglomerate said reducing its dividend to 10 cents a share from 31 cents will save the company $9 billion annually. The company has been paying a regular dividend for more than 100 years. In recent months, however, it faced persistent speculation that it would have to slash its payout to preserve cash.
"We recognize the importance of the dividend to our shareholders and the significance of this decision, but we believe it is the right precautionary action at this time to further strengthen our company for the long term, while still providing an attractive dividend," GE Chairman and Chief Executive Jeff Immelt said.
General Electric (GE:General Electric Company
News , chart , profile , more
Last: 8.51-0.59-6.48%

4:00pm 02/27/2009

Delayed quote dataAdd to portfolio
Analyst
Create alert Insider
Discuss
Financials
Sponsored by:
GE 8.51, -0.59, -6.5%) , along with many of the other 30 members of the Dow Jones Industrial Average (INDU:INDU
News , chart , profile , more
Last:


Delayed quote dataAdd to portfolio
Analyst
Create alert Insider
Discuss
Financials
Sponsored by:
INDU, , ) , has been under pressure to raise capital to bulk up its balance sheets. The company has also been determined to maintain its coveted triple-A credit rating to help keep its financial costs down.
Since the recession took grip in mid-September, GE shares have plunged nearly 70% over concerns about its dividend, under-funding in its retirement program and deterioration at its financial arm. The company has been hit hard by the tighter restrictions on credit and declining asset values.
On Friday, the stock fell 6.5% to $8.51.
Analysts at one research firm said they suspected the cut isn't enough, noting the rapid decline of its assets and a need to refinance its expensive, short-term debt over the next 12 months.
"With the tsunami sweeping over the financial sector, it is unrealistic to expect that GE will not get wet," said credit-ratings company Egan-Jones in a research note.
Standard & Poor's said it would leave GE's credit rating unchanged for now at AAA with a negative outlook.
"We estimate that the reduction in the dividend payment will allow cash balances at GE to reach at least $5 billion by the end of 2009 and to grow further in 2010," the credit-rating agency said in a report. "We would view a portion of such balances as a partial offset to GE's now net under funded post-retirement obligations, which we view as a debt-like obligation."
Furthermore, the agency said it doesn't expect GE Capital to make its current 2009 net income guidance of $5 billion.
Moody's Investor Service said it is continuing its review for possible downgrade of GE and GE Capital's long-term ratings.
The decision to cut the dividend follows General Electric's bruising fourth-quarter results on Jan. 23, showing a 44% drop in its net earnings on declines in its financial and consumer-product businesses. That trend is expected to continue through 2009, and the company said it would bulk up its cash reserve to weather the challenge. See full story.
Christopher Hinton is a reporter for MarketWatch based