This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

GE Dividend a Cause for Concern

Updated from 1:07 p.m. EST

General Electric (GE - Get Report) is preparing to report fourth-quarter earnings Friday against the backdrop of mounting investor worries about the capital levels of U.S. financial companies and concern about the conglomerate's dividend.

GE has said it will not take equity from the government, even as former financial blue chips like Citigroup (C - Get Report) AIG (AIG - Get Report) and Bank of America (BAC - Get Report) come back for second helpings of funds from the $700 million federal bailout approved by Congress in October.

The Dow Jones component also said it will not increase its dividend for the first time in more than 30 years, but it insists it will not cut it.

The two issues are most likely intertwined. Taking money from the government would be especially risky for GE, because it could lead to political pressure on its quarterly payout. And cutting its dividend could be especially costly, since GE estimates about 40% of its shareholders are retail investors.

Nicholas Heymann, analyst with Sterne Agee, estimates GE raises $4 billion to $5 billion annually through reinvestment of its dividend -- an amount that could be threatened if retail investors lose their dividend.

"That will probably start to recede rather than increase as a source of cash flow," Heyman says.

This is no doubt in the minds of GE officials when they say they don't need government capital. The original rules of the federal Troubled Asset Relief Program, or TARP, prohibit banks from increasing their dividends, but pressure is growing for banks who received a government investment to make any kind of a payout. The speed with which companies like Citi and BofA went through the first $350 billion of the $700 billion bailout legislation has been shocking to many, leading to a major selloff in equity markets last week.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AIG $64.11 0.83%
BAC $17.81 2.18%
C $54.86 1.40%
GS $193.01 1.60%
GE $30.17 0.77%


Chart of I:DJI
DOW 17,888.35 +168.43 0.95%
S&P 500 2,102.63 +22.22 1.07%
NASDAQ 5,156.3060 +47.64 0.93%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs