General Electric (NYSE:GE) “absolutely” must cut its dividend, perhaps to:
….as low as $0.50 from the current $0.96, as part of a plan that leads to a smaller and more focused company, Jeff Sprague of Vertical Research Partners tells CNBC.
“If you look back over the last few years, it was fine that the industrial cash flow wasn’t covering the entire dividend because you had GE Capital covering its fair share. But the company has shrunk, GE Capital is gone and it’s just not sustainable… to carry that dividend any longer,” Sprague says.
While it is “conceivable that looking out a few years, GE ceases to exist as we know it,” Sprague is one of several analysts who believes a full-scale breakup “could destroy value.” (earlier)
His 2018 some-of-the-parts valuation comes out to $18-$20 for the stock, but “while portfolio simplification is necessary, we do not see a significant valuation unlock from the effort. In fact dis-synergies on tax, pension, central costs, etc. could further erode value.”
GE finished +2.5% in today’s trade in anticipation of Monday’s investors day presentation; it is down 35% YTD.