It's hard to believe that such a fabled American conglomerate as General Electric Company (GE) has stumbled to such lows. Tuesday was a particularly bad day for GE, as its stock plunged by more than 10% to below $10 per share, a nine-year low.
Already Halved This Year
This extension of the recent sell-off occurred after the company announced on Tuesday morning that it would be slashing its once-prized quarterly dividend payout by over 90% to $0.01 per share, beginning in 2019. The 2018 quarterly dividend had already been cut in half to $0.12 from 2017's $0.24. General Electric stands to save close to $4 billion annually as a result of this dividend cut. The troubled company has been hit particularly hard by the underperformance of its struggling power business, which it has announced will be split into two units.
The chart below shows the steady historical rise of GE's annual dividend payout, with increases occurring almost every year since the late 1970s up to its height at $1.24 per share annually in 2008, when the financial crisis hit. From there, the dividend dropped sharply but then began to rise again in 2011. The next sharp drop occurred, as noted, in 2018, when the dividend was cut in half.
With the annual payout slated to fall dramatically to $0.04 annually in 2019, GE dividends will not have seen such low levels since 1977. Given that many shareholders have historically held GE stock primarily for its quarterly payouts, it comes as no surprise that the stock is now being dumped – the proverbial goose has simply stopped laying golden eggs.