General Electric (GE) announced today that they will be cutting their dividend from 31 cents per share down to 10 cents per share which is a whopping 68% drop.
This is significant because GE is considered to be the proxy of the American economy as it covers a number of different industries and is the 10th largest company in the world. Cutting a dividend is not the worst thing in the world however since it indicates that management is in cost-cutting mode and willing to do whatever it takes to make the company profitable again. Companies that hang on to their high dividend too long for public relations reasons could very well end up suffering for it.
Of course, not all companies are cutting dividends – so don’t go and sell all your dividend stocks just yet!
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FP,
Thanks for the overview of GE’s dividend cut. I didn’t know that the company hasn’t cut dividends since 1938. Where did you get the info from?
DGI – someone tweeted a link to the announcement – I think I googled and found an article that mentioned that fact.
Another interesting fact is that it is the only original member of the Dow remaining (although it has been off the index at times). I read that on Wikipedia.
I have a few shares of GE in my portfolio. The dividend cut is disappointing from one perspective, but if it helps the company, then it’s not all bad. Long term GE still has good prospects – at least outside of their banking branch. This economy certainly is interesting. 10 years from now we’re going to look back and lament the days when stocks were so cheap!