First Time in Thirty Years - GE Won't Raise Dividend

With all the headlines with respect to General Electric (GE) yesterday, some may have missed some key details regarding the dividend. While announcing a cut to the conglomerate's full-year profit forecast as well as a halt to the share buyback, GE also explained that its board voted to maintain GE's 31 cent quarterly dividend through until the end of 2009. This means that 2009 will be the first year since the 1970's that GE will not raise its dividend.

Jeff Immelt, GE's CEO, said:

Given the recent dramatic developments in the financial markets, we have made some tough decisions to further reduce risk and strengthen our balance sheet while maintaining our dividend.

Although all of these decisions by GE to preserve capital seem to have been viewed positively by the market and the rating agencies, I can't help but think that today is a sad day for dividend investors everywhere. One of the largest, most diverse, and most stable dividend growing firms in the world has decided to not raise its dividend for the first time in decades. It will be interesting to see how many companies decide to go this route when faced with the tough financial decisions that the credit crisis has brought.

Comments

[bonifiedhus...:]

Canary in the coal mine?

2008 Sep 26 02:46 AM

[vodka_tonic:]

what are you an idiot ? ....the stock price has cratered and still the same divident amount == higher yield in a very tough market.
utter nonsense article.

2008 Sep 26 02:47 AM

[crankyinvestor:]

Thanks to Jeff Inmelt and his marginal performance over the past 5 years, I'll be using a walker and living on crackers and cat food by the time I can retire.

2008 Sep 26 05:39 AM

[formerhawk:]

I gladly sacrifice the dividend to keep them in business. Long GE and hope my base investment is secure. If the world doesn't fall off the edge because of credit problems GE will be an incrediably great investment at these levels 5 to 10 years out.

2008 Sep 26 08:25 AM

[longandshort:]

Your attitutde expressed in the article is exactly what got us into this mess....you want MORE for LESS or NOTHING. How about commenting about other cash cow companies who don't pay any dividends at all...google, rim...

2008 Sep 26 09:29 AM

[Dividend Gr...:]

It's obvious to me that most investors here rely exclusively on capital gains as opposed to dividends. Since you are a partial owner of the business, why shouldn't you get paid for that ( dividends)?
Imagine if there wasn't a dividend payment over the past decade. What would have GE's returns been?

2008 Sep 26 10:06 AM

[Norman Lepo...:]

GE needs new management. Our country needs new leaders. All of our so called leaders need to be replaced and these idiots that run companies like GE need to be replaced with normal people that can run a company.

2008 Sep 26 10:10 AM

[longandshort:]

Its time for Engineers to run Engineering companies and MBAs to....heck MBAs can't even manage banks!

2008 Sep 26 10:47 AM

[globalq:]

Breaking of the consecutive rise of dividends since the 70s makes for one cockroach among a thousands running wild at GE.

Here are some visible roaches that I see:

Roach #1. Stopping the dividend increases that go back to the 70s.
Roach #2. Stopping the share buybacks.
Roach #3. Unforeseen disappoinmenting earnings in Q1.
Roach #4. The marginal/disappointing performance since Q1, with excuses that "we are protecting our AAA rating."
Roach #5. The continuing cataclismic stock price dive in the past few months together with the relentless stock price slide in the past 5 years.
Roach #6. Having to divest of divisions at the bottom of a market to placate analysts, and give the appearance that something productive is taking place.

There is an old adage on Wall Street that states "Once you have seen one roach in the open, there are thousands hiding behind the walls, ceiling, floor, and Board Room."

What can one conclude in seeing all these roaches running around at GE,
The price of GE stock will break $18 before the end of '09.
The CFO will "leave",
The CEO will "leave",
Stockholders will train a new team for another 5 years.

globalq

2008 Sep 26 06:17 PM

[Emerald:]

Underneath the AAA hype is a company that kept its bottom line intact under Jack Welch by positioning most of its "long term" debt in short term paper. Very risky and it worked until Bill Gross of Pimco called GE on it. Welch also converted GE into a commercial bank via GE Capital and now a large portion of its earnings come from financing. Don't be fooled by all the slick ads that imply its a manufacturing firm. Now that the green cutain has been pulled back, Emmelt is getting very nervous and wants to be on the no-shorting list. The dividend is safe until it isn't! (writedowns on mortages?) Note: Long GE, but nervous.

2008 Sep 27 03:10 PM

[GregT:]

Good article and a few good comments as well. I tend to agree with those who see a great deal of value in GE, but also see reason to worry. The press releases last week stated that GE would stop the buyback, reduce earnings projections and "maintain" the dividend. No one focused on the lack of a dividend increase.

One of the big benefits of being a dividend investor is that you realize that "dividends don't lie." When a company stops increasing the dividend they are signaling trouble. Why wasn't the dividend increased a token 1% or so? Why stop a run of 3 decades of dividend increases? Because, as most have pointed out, things are not good.

Are all of the problems reflected in the stock price? Maybe most of them are, but we've had a lot of surprises from this once very consistent company.

2008 Sep 29 07:21 AM

[globalq:]

I was speaking of roaches above, well, the Buffet deal is a king sized roach if I ever saw one!

2008 Oct 03 05:13 PM