GE Finally Opens Door To Dividend Cut (GE)
February 6, 2009 by Douglas A. McIntyre
General Electric Company (NYSE:GE) has authorized its regular quarterly dividend of $0.31 per share. This will keep the dividend the same, but if you read into Jeff Immelt’s comments, it seems as though he is preparing investors for a cut. We think the line is drawn in the sand. Finally.
Immelt said, “The Board and I believe that it is in the bestinterests of the Company’s shareowners to continue to pay an attractivedividend. The Board and I will continue to evaluate the Company’sdividend level for the second half of 2009 in light of the growinguncertainty in the economy, including U.S. government actions, risingunemployment and the recent announcements by the rating agencies. Ourfundamental priorities will remain keeping the Company safe and securein the current environment and investing in attractive growthopportunities.”
So here is the promise… the same for now. An "attractive"dividend ahead being in the best interest does not mean it will bekept at the same level. It just means it will be attractive, and thatcould be defined as any rate.
When Immelt uses phrases such as "evaluating that dividend for the second half of 2009 in light of" this is a red flag for investors. He even notes what theratings agencies have said.
"Fundamental priorities remain in keeping the company safe andsecure" means the balance sheet, not a shareholder dividendcheck.
"Investing in attractive growth opportunities" soundsnuts today, but there are untold billions in assets that will come upfor grabs if banks get nationalized, if a bad bank comes up, or inother distressed arenas. We doubt GE would make any size acquisitionfor the foreseeable future. But a few months out could be a different story if its overhead is lower.
The dividend is payable April 27 to shareholders of record at theclose of business on February 23. The ex-dividend date isFebruary 19. This dividend payment will complete the dividend forthe first half of 2009.
So again, Immelt is keeping the dividend the same for today. But he finally gave himself an out for after the Q2 period.
Take our word on this unless there is a sudden massive economicimprovement, thr dividend gets cut significantly after April.
GE shares are barely up 1.5% at $11.02.
Jon C. Ogg
February 6, 2009
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