GE’s massive dividend cut may not be so very bad for the stock very long term

GE shares broke below $19 for the very first time in a lot more than five years on Tuesday, as the stock’s electric slide continued for the second-straight session.

The ailing behemoth saw its shares slide up to 7 percent on Monday, because of its worst trading day since 2009, following a dividend cut and a weak 2018 forecast released at its investors meeting. But if new history is definitely any indication, the trim may not spell doom for GE shares.

Regarding to S&P Global, the firms with the largest dividend cuts beyond the financial crisis are Pfizer in January 2009, Abbott Labs in December 2012, Kinder Morgan in December 2015 and Conoco Phillips in February 2016.

One year after cutting those dividends, 3 of the four corporations surged. Shares of Pfizer, Abbott and ConocoPhillips soared 28, 44, and 49 percent respectively, while Kinder Morgan was lower by about 4 percent. This suggests that GE may possibly follow in their footsteps, a comfort for the battered name which has fallen 40 percent this season and tracking because of its worst gross annual performance since 2008.

While it’s been a tough year for General Electric shareholders, Matt Maley of Miller Tabak says the dividend cut isn’t the ultimate nail in the coffin for the inventory. “You need a little faith there that the brand new CEO can change things around, but you pick away at it over another couple of years and it might take a while. But I think you look at a decade from now and you’re going to look really good,” he said Monday on CNBC’s “Trading Nation.” “Other activities will outperform … [but] I think it’s going to be a solid one. GE’s not moving away from business.”

Chad Morganlander, portfolio supervisor at Washington Crossing Advisors, believes certain fundamentals have to transformation for GE to get worth buying. Even as the company has transitioned to new CEO in John Flannery, Morganlander believes the water even now looks murky for GE, and Monday’s investor assembly did nothing to quell any problems.

This is also true, says Morganlander, about the company’s three main branches as GE continues to market off parts of its business. Flannery confirmed that the company was looking to sell its lighting division and would give attention to its health, electric power and aviation branches.

“They have to present some consistency on the free cashflow before we would go and buy,” Morganlander said on “Trading Country.” “You could see, probably 36 months out or even more, that they essentially break up three divisions that they are hoping to consolidate in 2019, nonetheless it remains to be observed.”

“That is perhaps an facts situation where we have to see additional facts to confirm if you’re fully engaged in the company,” he added. “At this point, we would hold, and we’d become underweight if we did on it.”

GE stock value was downwards 5 percent Tuesday, trading below $18 a show.

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