IT HAS TO. THERE IS NO WAY IT CAN KEEP ISSUING ITS DIVIDEND.
IT MAY MAKE THIS DIVIDEND BUT WATCH OUT
It is rumored (a newer rumor) that GE has convened a task force to assess moving from AAA to (AA - or a lower rating????).
They reaffirmed their dividend yesterday. So, by extension, the next step is default...
If they have non-cumulative preferreds they can suspend payment for 4 quarter without being in default. However, under current conditions even that would be the death knell for GE. The failure of GE to pay "any" dividends would bring this to a head rather quickly. GE is one of the most widely held stocks in America and considered to be as American as apple pie.
This would really scare some people.
If my math is about right, GE's annual dividend at the 8.8% rate cost's the company about $12.3 billion. If this is suspended, it means that the company is reinvesting $12.3 back into the company (to make it a stronger, better capitalized company) as opposed to paying it out in dividends. On balance, that should be good for the company and good the stock price...but the market might not see it that way. Optimally, I's think that GE will trim the dividend, to a 4-5% yield...basically, cut it in half. In any case, you'll probably see a $12 stock price before all is said and done. Discolsure: I'm long GE at $13.04 and believe it's a strong buy at these prices if you're looking to hold for 6-12 months.
I believe if they stall on the preferreds and trim the common dividends, the common goes to $6.00
look at the other companies that followed the same route.
Retaining earnings under normal circumstances is ok but when 50% of GE revenues comes from financial activities, it tells you how this company went from a once, manufacturing great to a derivitave monster. imo