General Electric (GE) is slashing its quarterly dividend in half with investors gathering in Boston, where Chairman and CEO John Flannery is expected to lay out significant changes for the U.S. company.
GE said Monday that the dividend will be cut to 12 cents per share, from 24 cents, starting next month.
Flannery says the dividend cut is part of actions that GE is taking to make the company simpler and stronger. General Electric Co. is expected to announce other plans, including a possible restructuring, later Monday. The last time GE had to reduce its shareholder payment was at the height of the financial crisis in February 2009, which represented the first cut since 1938. GE, the only remaining original member of the Dow Jones Industrial Average, has paid a dividend to investors since 1899.
The decision to halve the dividend represents a blow to the millions of shareholders who have come to expect that income.
More than 60 percent of GE's shares are held by retail investors, or individuals who hold the shares in retirement or investment accounts, rather than financial firms and money managers. That raises the risk that many of those retail investors will flee because of the lower dividend.
Speculation about whether GE might cut its dividend arose last month, after the conglomerate missed Wall Street's third-quarter estimates, sending shares tumbling. GE also slashed its 2017 forecast for cash flow it receives from industrial operations by almost half, from $12 billion to $7 billion. GE spends about $8 billion per year to pay dividends.
New CEO John Flannery, who took over the company Aug. 1, called the third-quarter results "completely unacceptable" and added that "everything is on the table" to improve results. At the time, he said decisions on its dividend and other issues would be made public at a Nov. 13 meeting.