General Electric to officially exit Dow Jones Industrial Average
Walgreens Boots Alliance will officially replace General Electric in the Dow Jones Industrial Average when trading begins on Tuesday morning, marking the first time in more than a century that the blue-chip index will open without GE as one of its 30 component stocks.
The change signifies the end of an era for GE, which was one of the Dow’s original components when it was founded in 1896. The industrial giant has struggled in recent quarters as company officials attempt to address systemic shifts in the U.S. economic landscape by cutting costs and restructuring their businesses.
Dave Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, said the switch would make the Dow a “better measure of the economy and the stock market” amid the shift from industrials to service-based businesses like healthcare.
“General Electric was an original member of the DJIA in 1896 and a member continuously since 1907,” Blitzer said. “Since then the U.S. economy has changed: consumer, finance, health care and technology companies are more prominent today and the relative importance of industrial companies is less.”
In a bid to reverse its financial difficulties and grow leaner, GE has attempted to sell several of its businesses. The company on Monday said it would sell its distributed power business for $3.25 billion.
GE CEO John Flannery is aiming to sell $20 billion in assets by 2020. The company is also said to be considering a potential cut or suspension of its dividend, less than one year after cutting the quarterly payout in half.
General Electric shares have fallen more than 3% since June 19, when S&P Dow Jones Indices announced the switch. However, the company’s forced exit from the Dow may end up as a positive development for the struggling industrial giant, according to Goldman Sachs analyst Joe Ritchie.
“While a negative in the near-term, we note that recent removals from the index have gone on to outperform the DJIA in the 12 months following the announcement,” Ritchie said in a note to investors on June 20.
Walgreens Boots Alliance, which trades under the stock ticker WBA, has gained nearly 5% since the announcement.