GE faces 2nd dividend lower since Great Depression

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Jeff Immelt steps down as CEO of General Electric

1. GE’s money crunch: General Electric in such monetary stress that it might quickly do the unthinkable: lower its beloved dividend.

John Flannery, GE’s new chief govt, is below huge stress to revive confidence in an organization dealing with a severe money crunch and a nosediving inventory worth. One-third of GE’s market worth has vanished this 12 months, making it the largest Dow loser by an extended shot.

GE (GE) is holding an investor replace on Monday to element a method to stabilize the corporate by slashing prices and promoting off extra companies. Wall Street badysts are bracing for Flannery to announce layoffs and simply the second lower to GE’s coveted dividend because the Great Depression.

GE confirmed in an announcement on Friday that “employee reductions,” a few of which have already begun, are a part of a previously-announced plan to chop prices by $three billion.

After GE reported terrible outcomes final month, Flannery stated the dividend stays a “priority,” however he did not rule out a discount.

The drawback is GE is not producing sufficient money to cowl dividend payouts promised to shareholders. It’s a shocking improvement given GE’s iconic standing and a sprawling enterprise that makes every part from jet engines and light-weight bulbs to MRI machines.

GE is one in every of America’s most widely-held shares, making a choice to chop the dividend even harder. Countless shareholders, together with retirees, have come to depend on the quarterly dividend funds.

“Retail investors have stuck with GE through many, many years of underperformance simply because they’ve counted on that dividend,” stated John Inch, a Deutsche Bank badyst with a “sell” ranking on GE.

“If you cut that dividend, all of a sudden that confidence is shaken,” Inch stated.

GE says it has been paying its dividend for greater than a century, “proving its strength and reliability.” The first dividend lower occurred in 1938 within the midst of the Great Depression.

The firm additionally lower its dividend in 2009 in the course of the Great Recession. But in contrast to these instances, such strikes are uncommon proper now. Many corporations are ramping up their dividends as a result of the U.S. financial system is wholesome and the inventory market is booming.

2. Movement on tax reform: The GOP tax plan is marching alongside.

Senate Republicans unveiled the contents of their tax reform invoice on Thursday, per week after their House colleagues launched their very own laws. The House laws additionally cleared the Ways & Means Committee.

Compbad Point Research, an funding and badysis agency, predicts that the House will think about and should cross the GOP tax plan subsequent week.

It’s no shock that issues are shifting rapidly. Republicans within the House and Senate have vowed to current President Trump with a plan earlier than the top of the 12 months.

For companies, there are just a few key variations between the House and the Senate’s model of the invoice, together with when a company tax lower would take impact and the way pbad-through enterprise earnings is taxed. The National Federation of Independent Business, which got here out in opposition to the House’s plan, stated it was “very encouraged” by the Senate’s revisions.

Of course, a lot work stays: The House and Senate payments’ variations should be reconciled and Republicans maintain solely a razor-thin lead within the Senate.

three. U.Ok. unemployment stays low: The U.Ok. Office for National Statistics will reveal its newest employment figures on Wednesday. Despite Brexit fears, unemployment in Britain could be very low.

In the spring, British unemployment hit its lowest level in 42 years. Since then, it has moved even decrease, holding regular at round four.three% in latest months.

But low unemployment would not essentially imply all is effectively within the U.Ok. According to the newest knowledge, common weekly earnings fell by zero.four% with out bonuses, when adjusting for inflation, in comparison with the identical interval final 12 months. And initially of the 12 months, banks started planning an exit technique from their London workplaces — suggesting that town’s days as a monetary hub could also be numbered.

four. Retail’s vibrant spots: Retailers will proceed revealing their monetary outcomes subsequent week.

On deck are a number of the trade’s strongest performers. Shares of Home Depot (HD), which is ready to report on Tuesday, have spiked by greater than 20% this 12 months. Best Buy (BBY) and Walmart (WMT), each set to report on Wednesday, have every soared by greater than 30% this 12 months. Their success marks a vibrant spot within the dismal retail panorama.

Some struggling retailers are additionally set to report subsequent week. Target (TGT), L Brands (LB), Gap (GPS), Abercrombie & Fitch (ANF) and TJX (TJX) are extra consultant of the retail trade — they’ve painted a way more pessimistic image.

5. Will oil proceed to rally? Oil costs have been rising for 5 weeks straight, and so they lately hit a two-year excessive. A couple of occasions subsequent week might decide whether or not that rally continues.

Oil ministers will meet on the Abu Dhabi International Petroleum Exhibition and Conference on Monday by means of Thursday, and OPEC will launch its subsequent month-to-month oil report on Monday. On Tuesday, the International Energy Agency will reveal its World Energy Outlook. Taken collectively, these reviews will provide clues into projections for each provide and demand for oil.

6. Coming this week:

Monday — GE hosts key badembly

Tuesday — Home Depot, TJX earnings

Wednesday — Target, Cisco (CSCO, Tech30), L Brands earnings; U.S. retail gross sales for October; U.Ok. unemployment

Thursday — Best Buy, Walmart, Gap, Viacom (VIA) earnings

Friday — Abercrombie & Fitch earnings

CNNMoney (New York) First printed November 12, 2017: 7:36 AM ET

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