It would be hard to pick a current CEO of a mega-cap American company that generates as many mixed emotions from investors as General Electric's (NYSE:GE) Jeffrey Immelt. Some of the criticism of Immelt is patently unfair; people who criticize GE's stock performance since Immelt took over for Jack Welch tend to ignore the fact GE was trading at 34x earnings the day Immelt took over as CEO. Considering that General Electric typically trades at 17-19x earnings during times of normal pricing in the stock market, he inherited a situation in which the stock was trading at almost twice the valuation of its normal range. It would take almost 100% profit growth just to tread water when the stock returned to fair valuation.
The other reason why some investors view Immelt's actions with a jaundiced eye is because General Electric had a reputation for dividend safety, but as the country entered the financial crisis, he promised the public that the dividend would not be cut, and then shortly thereafter, the troubles at GE Capital grew so bad that Immelt had to announce a dividend cut. I don't really blame Immelt for having to cut the dividend out of financial necessity, and I can't really find fault with people who hold this fact against Immelt, either.
But what I find most interesting is what Immelt has been up to since the dividend cut in terms of creating value for shareholders:
1. He has secured General Electric's role as an industrial powerhouse. The backlog is now approaching $250 billion. With the exception of a few defense contractors, it's impossible to find any other company in the world with as much pre-ordered work as GE. In 2007, the operations between GE Capital and GE industrial were roughly split 50/50. Now, GE's $1.65 in profits per share consist largely of $1.10 or so
