GE needs to slash dividend again, JPMorgan warns
The “bottom line” for General Electric is the industrial conglomerate must cut its dividend again in order to improve its financial standing, according to analysts at JPMorgan.
Investors are bracing for the possibility that GE, which already slashed its dividend in half in November, could reduce the quarterly payout amid a broader restructuring of the company. FOX Business’ Charlie Gasparino reported last month that GE is considering another dividend cut as CEO John Flannery looks to meet his goal of shedding $20 billion in costs. Flannery later wouldn’t guarantee the dividend’s survival, saying, “We have to see how this plays out.”
JPMorgan analyst Stephen Tusa estimates that GE will need $30 billion to $40 billion in cash to pay off enough debt to meet requirements set by ratings agencies, he wrote in a research note cited by CNBC and Barron’s. GE can raise cash from the sale of additional assets, such as oilfield services unit Baker Hughes, Tusa said.
But a lower dividend will be necessary for GE to reduce financial risk, according to Tusa. GE, which has paid a dividend since 1899, has cut it only three times.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| GE | GE AEROSPACE | 178.70 | +0.72 | +0.40% |
“The bottom line is that we see the need to de-risk substantially, which includes the need for cash and a cut to the dividend to help with operational de-levering,” he wrote.
Among Wall Street analysts, JPMorgan has the lowest price target for GE at $11 a share. Other analysts also have downbeat views, with Cowen referring to GE as a “show me” stock with a price target of $12.
UBS warned last week that GE will only be able to cover its dividend by a small margin and there’s little room for error, analysts at the investment bank wrote.
GE has been the worst performer in the 30-member Dow over the past 12 months, falling more than 50%. Shares were down 2.8% on Monday.