General Electric Hangs on to Retail Investors

General Electric says its recently cut dividend and loss of its triple-A credit rating have not eaten away at its large base of retail investors.
Author:
Publish date:

General Electric

(GE) - Get Report

says its recently cut dividend and loss of its triple-A credit rating have not eaten away at its large base of retail investors.

A GE spokeswoman told

TheStreet.com

that, as of last week, a healthy 40% of GE's shareholders are retail investors. That is the same percentage of retail shareholders GE said it had at the end of the fourth quarter, but analysts expect the stock's popularity among small investors could begin to wane.

"It is likely that as they have lowered the dividend, they become a less attractive retail holding for folks. Much of their retail base held it as a dividend stock," says Steve Winoker, analyst with

Sanford C. Bernstein & Co.

As TheStreet.com pointed out last month, many of

General Electric's

retail investors may now be rather unhappy with CEO Jeff Immelt for saying in January the firm had no plans to cut its dividend, only to turn around and cut it less than two months later. Some of them are now suing GE, which has said it gave fair warning in February.

Samuel Rosen, an attorney with Harwood Feffer who is representing several litigants, says he has never heard from so many aggrieved shareholders ready to sign onto the lawsuit.

"Usually we get emails about how awful we are and, 'Why are you trying to hurt the company?," Rosen says. "This time people like us. They really like us."

Rosen shared with

TheStreet.com

several email messages his firm received from aggrieved GE shareholders.

"I bought 3500 shares of GE on Feb. 27 ... on the NYSE, in the expectation that the 2009 dividend would be paid as I heard Jeffrey Immelt specifically say on

CNBC

," read one such message, from an investor who Rosen asked not be named.

Daniel Wallace, an investor who describes himself in an email to Harwood Feffer as "a 100% and totally disabled U.S. Marine," wrote he bought less that $300 worth of GE stock in February.

"I don't have a lot of money but tried to start a savings and investment plan," Wallace wrote. "I trusted that GE would be a good idea as I read the CEO's statements and thought he was trustworthy. Apparently I was wrong." Efforts by

TheStreet.com

to reach Wallace were unsuccessful.

Whether investors should care if a stock is owned by retail or institutional holders is an open question, Winoker says.

He says many companies like to have a large base of retail shareholders because it creates less volatility in the stock.

"That has never been proved perfectly but there's some indication that that's true," Winoker says.