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By Lewis Krauskopf and Dan Burns
NEW YORK (Reuters) – Shareholders of General Electric Co have been hit by another blow Tuesday.
The US industrial conglomerate announced that it would restructure its production unit and said it was facing a deeper accounting investigation as the new chief executive, Larry Culp, tried to relaunch the struggling company.
GE shares fell 10%, falling below the $ 10 mark, reaching their lowest level since the beginning of 2009. GE shares, which were launched earlier this year in the Dow industrial average Jones, have now fallen by more than 40% and lost two-thirds of their value since the end of 2016.
For long-time shareholders, Tuesday's third quarter report contained another bitter pill. GE, which needs liquidity, has virtually eliminated its quarterly dividend, reducing it to one penny per share of 12 cents.
The dividend cut marks a major change for GE, whose shares have consistently been offering a higher dividend yield than the S & P 500 for about 15 years.
Chart: GE's high yield days are over – https://tmsnrt.rs/2CTVGgG
GE's $ 4.17 billion dividend cut is the eighth largest in the history of the S & P 500 companies, according to Howard Silverblatt, senior analyst of the indexes at Standard & Poor's.
According to Silverblatt, GE also holds the title of the largest dividend reduction, for its US $ 8.9 billion reduction in February 2009, in the midst of the financial crisis, when Jeff Immelt was chairman and chief executive officer.
GE also claims ninth for dividend reduction, for the $ 4.16 billion reduction made about a year ago by recently-elected CEO John Flannery. This gives GE three places in the top 10 of the list of the biggest reductions ever made by Silverblatt.
At its peak, GE was generating dividends of over $ 12 billion a year for shareholders. Next year, it will disburse less than $ 500 million.
Chart: Dividend of the GE dividend – https://tmsnrt.rs/2CR3jEL
GE's one-time payment helped protect shareholders from the rock-solid performance of the action. Over the last decade, GE shares have fallen by almost 50%, but its total return, including reinvested dividends, was only 26%.
From now on, shareholders will no longer be able to rely on the safety net of a high dividend.
Chart: GE's total return over 10 years – https://tmsnrt.rs/2P3MnT2
Formerly the largest US company in terms of market value, GE's market capitalization fell below $ 90 billion on Tuesday, less than one-sixth of its 2000 level.
The declining market capitalization means that the influence of the single economic witness on the benchmark, the S & P 500, has also fallen dramatically. Its impact on the S & P 500 is now less than 1/10 of the influence of Apple, the largest US company whose market value exceeded $ 1 trillion.
Chart: GE's declining influence on the S & P 500 – https://tmsnrt.rs/2CPI1ayGraphic: GE was once a stock market titan – https://tmsnrt.rs/2COGl18
On Tuesday, GE announced a $ 22.8 billion loss for the third quarter after writing down $ 22 billion of goodwill as promised profits from its production facility are now unlikely.
GE has not reduced its earnings guidance for the year from $ 1.00 to $ 1.07 per share.
But analysts expect a further decline in annual profits, according to Refinitiv data, which would continue to decline steadily for GE's profits.
Graphic: GE Reduction – https://tmsnrt.rs/2OxFQyV
(Report by Lewis Krauskopf and Dan Burns, edited by Leslie Adler)
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