General Electric Company (NYSE:GE) 92% Dividend Cut Indicates That It Is Making Less Business


General Electric Company (NYSE:GE) recently announced 92% cut in its dividend, a quarterly slash of $0.01/share. It is almost 96% less than the company paid a year ago. Last November when GE announced its intention to cut down the quarterly dividend by 50%, it was just a starting act. The company’s announcement after the very weak third-quarter results just indicated that it is making less business year after year.

GE is still in business, yet to reach end-stage

Of course, the company is still in business and is yet to reach the end-stage of the game where an organization faces bankruptcy. However, things are certainly not working the way they did earlier. In June this year, GE stepped down from the Dow Jones industrial average. Even then GE continued to be the only original index surviving as an independent company.

The recent declaration of penny dividend is just a continuation of it. Since the company is now making less money it is trying to use the benefits of free-market capitalism. The aim of the company now is to build any form of economic structure so that it can produce the most with the minimum. GE now demands absolute efficiency, getting maximum output with minimum inputs. One of the benefits of capitalism is that people go after those profits for their own benefit.

The combined overview of the system provides an entire objective measure of how an activity is faring. Right now the overview suggests that GE is doing well.

GE facing problems in power and renewable businesses

The recently revealed third-quarter results from GE represent a continuation of the trends that the company has been witnessing in business since more than a year now. The aviation business is at present providing the much-needed strength to the company by producing strong earnings growth and revenue. However, the healthcare neither is showing growth nor is going down indicating that it is a steady performer.

The major sore points for GE are the power and renewable businesses. As per reports, the company revenue in power unit plunged 33% with segment earnings losing around $631 million as compared to $464 profit it earned a year ago. In the case of a renewable-energy unit, the revenue although spiked to $2.9 billion, the margin pressure became worst due to weak price environment.