General Electric has dramatically reduced its quarterly dividend to one penny per share beginning in 2019, the second cut in the dividend in the last year and a big move by new CEO and Chairman Larry Culp to free cash for the company.
The cut in the dividend came as the conglomerate reported third quarter adjusted earnings of 14 cents per share which were 6 cents short of Wall Street expectations of 20 cents.
Revenue during the quarter dropped 4% to just over $29.57 billion and came up short of expectations. On the basis of GAAP, the company lost over $2.63 per share during the quarter.
The company said that it would divide up its power business into two separate entities. It took a noncash charge of $22 billion during the third quarter related to an acquisition made in its power business.
During the conference call for third quarter earnings, GE said that the SEC had expanded its scope of its current accounting investigation of GE to include the goodwill charge.
Shares dropped during premarket trading following that disclosure and were off by 3.6% falling to $10.76 and representing a low of nine years.
Culp said following the first report of earnings under his leadership that the results came up short of GE’s full potential and called for an increased sense of urgency and more accountability across the entire organization to deliver results that are much better.
The conglomerate is expecting to retain cash in the amount of as much as $3.9 billion annually thanks to the cut in dividend.
One Wall Street analyst called the cut in dividend bold action by the CEO and said it was a sign more of the same will be done with the company portfolio.
GE’s turbine sales business to coal-fired and gas power plants had been suffering already of recent as utilities increased construction of wind and solar farms.
GE’s power division is to be reorganized into a gas products and services business as well as a business of the remaining power assets of grid solutions, steam and nuclear and power conversion.
Culp was appointed to the CEO position on October 1 after John Flannery the former CEO frustrated the board at GE with the slow pace he was taking of change. GE made an announcement on October 12 that the report for the third quarter would be delayed for five days to give the new CEO a complete month to play catchup.