GE cut the dividend yesterday by 68%. On January 23 I wrote:
"A lot of commentators are wondering whether GE results will be strong enough to protect the dividend. I'm beginning to question the wisdom of that.
GE's return on equity over the last two years has been around 19%. To oversimplify, if you, Mr. Investor, give GE a dollar of equity, they will earn almost 20% on that dollar year in and year out. If you want the dividend protected, you would rather get 9% back on your money than have GE reinvest it in the business at a higher return...
I wonder what would happen if Immelt says on the call, "There are so many fantastic investment opportunities across all of our core markets that we are cutting the dividend to ensure utter global industrial/financial domination." "
They should hire me. I'm running five weeks ahead of the game.