General Electric (GE) shares hit a 52-week low on Friday after the company's stock was downgraded to "sell" from "hold" by analysts at Deutsche Bank who said that the company will be forced to cut its current 24 cents per share dividend and lower its earnings guidance in the coming years.
After hitting a $27.85, 52-week low during the session, the shares recovered modestly and closed the session at $28.27, down 60 cents or 2.08%.
"GE's weak cash flow has become worse in recent quarters ... The company appears to be operating relatively 'close to the line' in terms of sufficient cash generation to continue to fund such a robust dividend and share repurchase program," analyst John Inch said.
General Electric last cut its dividend during the financial crisis in 2009. Then, it trimmed the payout by 68% in the first such action in 71 years.
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"If the cash flow bounces right back, then you shouldn't worry about GE," Cramer said Friday. "If it doesn't, then the Deutsche Bank note is going to hold true."
In April GE CEO Jeff Immelt said the company was on track to cut fixed costs by $1 billion in 2017, one of the targets set in talks with activist Nelson Peltz's Trian Fund Management, and CEO Jeffrey Immelt expects the reductions to pick up speed later in the year.
The Boston-based conglomerate reduced expenses by about $375 million in the three months through March before boosting spending in its digital manufacturing business and raising wages by about $80 million, executives said on an earnings call. That left a net reduction of about $76 million.
"The goals for industrial operating profit and structural cost-out are in sight," Immelt said on the call.
He says GE has fluctuated above and below $30.50 for the past twelve months. Agile traders may be making some gains, but investors have to take comfort only from GE's dividend payout of around 3.25%. That might be fine for a long-time GE employee in Connecticut, but the nutmeg state is also home to many hedge funds who are looking for better returns.
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This story has been updated from May 12 with additional information.