October 30, 2018 / 7:50 PM / 9 months ago

GRAPHIC-GE's demolished dividend shreds shareholders' safety net

    By Lewis Krauskopf and Dan Burns
    NEW YORK, Oct 30 (Reuters) - General Electric Co
shareholders were dealt yet another blow on Tuesday.
    The U.S. industrial conglomerate said it would restructure
its power unit, and said it faced a deeper accounting probe as
new Chief Executive Larry Culp moved to try to revive the
struggling company.
    GE shares were down 10 percent, dropping below $10 to touch
their lowest point since early 2009. Shares of GE, which was
booted from the blue-chip Dow Jones Industrial Average
earlier this year, are now down more than 40 percent this year
and have lost two-thirds of their value since the end of 2016.
    For longtime shareholders, Tuesday's third-quarter report
delivered another bitter pill. Cash-needy GE all but eliminated
its quarterly dividend, slashing it to a penny a share from 12
    The dividend cut marks a major shift for GE, whose shares
regularly offered a higher dividend yield than the S&P 500
 for about the past 15 years. 
    GE's $4.17 billion dividend cut is the eighth largest in the
history of S&P 500 companies, according to Howard Silverblatt,
senior index analyst at Standard & Poor's.
    GE also holds title to the largest dividend reduction,
according to Silverblatt, for its $8.9 billion cut in February
2009 during the throes of the financial crisis, when Jeff Immelt
was CEO. 
    GE also lays claims to the ninth spot for dividend
reductions, for the $4.16 billion cut made about a year ago
under recently departed CEO John Flannery. That gives GE three
spots in the top 10 for Silverblatt's list of biggest-ever cuts.
    At its peak, GE lavished shareholders with more than $12
billion a year in dividends. Next year it will pay out less than
$500 million.
    GE's once-fat payout helped cushion shareholders from the
stock's rocky performance. Over the past decade GE shares have
slumped nearly 50 percent, but its total return, including
reinvested dividends, was just negative 26 percent. 
    Now shareholders will no longer be able to bank on the
safety net of a rich dividend.
    Once the biggest U.S. company by market value, GE's market
capitalization fell below $90 billion on Tuesday, less than
one-sixth of its level in 2000.
    The declining market cap means the influence of the one-time
economic bellwether on the benchmark S&P 500 has also fallen
dramatically. Its impact in the S&P 500 now is less than 1/10th
that of the influence of Apple, the biggest U.S.
company with a market value eclipsing $1 trillion. 
   On Tuesday, GE reported a loss of $22.8 billion for the third
quarter, as it wrote down $22 billion in goodwill because
promised profits from its power unit are now unlikely.
   GE did not cut its earnings forecast for the year from the
most recent $1.00 to $1.07 per share.
   But analysts are bracing for another decline in annual
earnings, according to Refinitiv data, which would continue a
steady decline for GE's earnings.

 (Reporting by Lewis Krauskopf and Dan Burns
Editing by Leslie Adler)
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