General Electric CEO John Flannery confirmed on Wednesday what Wall Street was already panicking about: The dividend may not be safe, even in its reduced state, sending the stock down over 7%, the biggest drop in nine years.
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“It is ultimately a function of the free cash of the company and that’s ultimately a function of operating performance and things we do with the portfolio” said Flannery in response to a question during the Electrical Products Group conference reported by Reuters.
On Tuesday, FOX Business was first to report that the water-downed dividend was in fact in danger. “Based on media reports (Charlie Gasparino at Fox Business), GE might be looking to again cut its dividend or eliminate it altogether,” wrote Bank of America analyst Andrew Obin in a note to clients titled “Potential divi cut volatility near-term, more stability long-term.”
GE, among one of the most widely held companies, was once viewed as a stock for widows and orphans for its generous dividend payout. Last November, that all changed when the company halved its quarterly dividend to 12 cents per share, in a rapid effort to conserve cash.
Since then Flannery, who took over last August, has been trying to turn around the troubled industrial giant by announcing plans to divest billions in assets, while also noting last November that “we are acting with urgency to make GE simpler and stronger to drive growth and create more value for our shareowners,” he said at the time.
On Monday, GE confirmed it will combine its transportation business with Wabtec corporation in a deal valued at $11.1 billion.
Flannery took over for embattled CEO Jeff Immelt, who was forced to resign last June. That prior March, FOX Business was first to report that Trian, run by legendary activist Nelson Peltz, was turning up the heat on Immelt for missing performance targets.