Could General Electric resort to cutting or suspending its dividend?
New General Electric Company (NYSE:GE) CEO John Flannery
took over a difficult position. Prior CEO Jeff Immelt left the ship (and GE
stock) taking on plenty of water. But the new chief exec has already been
making swift decisions about the new direction of GE. Will it be enough?
Immelt bought into energy and bailed on financials at the
wrong time. He made error after error that were profoundly close to being
lethal. Instead his series of “near-miss” mistakes led to a very melancholy
stock price over the past decade. GE stock is down 40% in ten years and up a
pathetic 10.5% over the past 20.
Its 10-year losses are reduced to -13% and its 20-year gains
are boosted to 98% when considering the dividend. That still lags the SPDR
S&P 500 ETF Trust (NYSEARCA:SPY) gain of 103% and 278%, respectively. But
it highlights the importance of GE’s dividend.
Despite his numerous blunders, Immelt’s worse one centers
around cash flow. The company’s operating cash flow (OCF) has all but dried up
after years of near-$20 billion totals. Free-cash flow (FCF) is all but gone,
leaving many investors worried about the company’s dividend that has been the
only saving grace over the last two decades.
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