General Electric, one of the 30 original members of the Dow Jones Industrial Average, will be removed from the leading index amid a prolonged stock slide and financial difficulties that have forced the one-time giant to cut costs.
Walgreens Boots Alliance will replace GE on the index as of the start of trading on Tuesday, June 26. General Electric was the only remaining original stock on the Dow. However, with shares trading below $13 as of Tuesday, the company’s stock “has a weight in the index of less than one-half of one percentage point,” according to a S&P Dow Jones Indices press release.
“General Electric was an original member of the DJIA in 1896 and a member continuously since 1907,” says David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices. “Since then the U.S. economy has changed: consumer, finance, health care and technology companies are more prominent today and the relative importance of industrial companies is less.”
General Electric CEO John Flannery has enacted company-wide cost-cutting measures as part of a broader restructuring plan. The company cut its quarterly dividend in half last November and is said to be considering another dividend cut in the near future.
General Electric had been the Dow’s lowest-performing stock over the last 12 months, with shares plunging more than 50%. Shares fell 2% in after-hours trading, while Walgreens shares rose more than 2%.
“Walgreens is a national retail drug store chain offering prescription and non-prescription drugs, related health services and general goods,” Blitzer said. “With its addition, the DJIA will be more representative of the consumer and health care sectors of the U.S. economy. Today’s change to the DJIA will make the index a better measure of the economy and the stock market.”