GE to pay quarterly dividend

Feb 7, 2009

WASHINGTON - GENERAL Electric Co said on Friday it will pay a planned 31-cent dividend to shareholders, but will evaluate dividend payments for the second half of the year as uncertainty grows over the long-term health of the economy and GE's ability to maintain its top credit rating.
The move comes as analysts continue to predict that the conglomerate will be forced to eventually cut its payments as it tries to stabilise its ailing lending unit and faces a deep recession that is hitting its industrial businesses hard.

GE's board of directors approved the dividend that will be paid to shareholders on April 27. Those who own GE stock as of Feb 23 will receive the quarterly payment. It is the second quarterly dividend GE has paid this year.

The company, which makes everything from locomotive engines to dishwashers, has said it plans to pay a US$1.24 per share dividend this year even as it projects lower earnings and says its lending arm, GE Capital, will be much less profitable.

Company officials have said the company is committed to the US$1.24 dividend, which would be the same amount that GE paid shareholders in 2008. But CEO Jeff Immelt said in a statement that he and the board will review the company's payments for the rest of 2009.

'The Board and I will continue to evaluate the company's dividend level for the second half of 2009 in light of the growing uncertainty in the economy, including US government actions, rising unemployment and the recent announcements by ratings agencies,' he said.

GE plans to shrink the size of its GE Capital lending unit this year, trimming its holdings of risky debt and cutting the work force after the financial crisis led to mounting loan losses. It also expects its industrial side, which makes equipment like aircraft engines, power plant turbines and medical equipment, to post earnings growth of only zero to five per cent.

Ratings agencies Moody's Investors Service and Standard & Poor's are both reviewing their ratings of GE this year. Many analysts suspect the company will lose its 'AAA' rating, largely due to the problems at GE Capital. They also are skeptical that GE will be able to generate enough cash to make the payments.

In a note to investors Friday, J.P. Morgan analyst C. Stephen Tusa Jr. wrote that the Triple-A rating appeared unsustainable, and that a credit rating reduction would likely be followed by a dividend cut.

'Our take is that these events are necessary catalysts of change for a culture that was built to manage earnings in a way that is clearly unsustainable over the long term,' he wrote.

Shares of GE rose 25 cents, or 2.3 per cent, to close at US$11.10.

Shares are already down more than 31 per cent this year in part due to investor worries over the dividend and credit rating. -- AP