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Thursday, November 13, 2008

"GE, Shares Falling, Repeats It Will Keep Dividend -Bloomberg

"GE, Shares Falling, Repeats It Will Keep Dividend (Update2)

By Rachel Layne

Nov. 13 (Bloomberg) -- General Electric Co., buffeted by the global credit crunch, repeated plans to keep its dividend unchanged next year after shares dropped below $15 for the first time since 1996.

GE said Sept. 25 it would keep the 2009 dividend the same as this year and there’s been no change in policy as some analysts have speculated, spokesman Russell Wilkerson said today. Fairfield, Connecticut-based GE has paid a quarterly dividend for more than a century and next year’s cash flow is expected to exceed the amount needed for the payout, the company said on its Web site.

“We are committed to our plan to pay the dividend in 2009,” Wilkerson said. “Nothing has changed.”

GE has lost about 60 percent of its market value this year amid a global financial crisis. GE fell 30 cents to $15.99 at 2:15 p.m. in New York Stock Exchange composite trading after declining as much as 10 percent to $14.58, the lowest price since September 1996.

The shares’ recovery started after two top executives disclosed they bought stock today. Chief Executive Officer Jeffrey Immelt purchased 50,000 shares to show his confidence, Wilkerson said. Immelt paid $16.41 to $16.45 a share, GE said in a U.S. Securities and Exchange Commission filing. Vice Chairman Michael Neal also bought 50,000 shares at $14.99 each.

Dividend Costs

The company pays a quarterly dividend of 31 cents a share, or $1.24 annually. The dividend has an indicated yield of about 7.9 percent and costs about $12 billion annually based on the number of shares outstanding.

GE paid $9.3 billion in dividends through Sept. 30, according to its third-quarter earnings presentation Oct. 10. The company had a cash balance of $6.7 billion plus $13.6 billion generated from operating activities, or $20.3 billion, before the dividend, stock repurchase, and other items ending with a cash balance of $3.5 billion.

Immelt lowered his target for 2008 profit twice this year and took steps to shore up GE’s capital and ensure liquidity. Last month he raised an additional $3 billion in the sale of preferred shares to investor Warren Buffett’s Berkshire Hathaway Inc. and $12.2 billion in common stock.

Government Programs

GE, whose bonds carry the highest available AAA ratings, yesterday said the U.S. government agreed to insure as much as $139 billion in debt for lending arm GE Capital Corp. In October, the company agreed to sell its commercial paper, the short-term funding companies use for daily operations, to a Federal Reserve facility created to help unlock credit markets.

“GE’s liquidity position improves dramatically” with yesterday’s entry into the Federal Deposit Insurance Corp.’s Temporary Liquidity Guarantee Program, Jeffrey Sprague, a Citigroup analyst in New York, wrote in a note to clients today. “However, earnings headwinds facing both GE Capital Services and the industrial businesses are increasing.”

While GE could pay a maximum of about $1 billion in potential fees if it insured the entire amount eligible, the cost of funding maturing debt may actually fall as a whole because of the backing, analysts including Sprague and Deutsche Bank’s Nigel Coe said.

“On balance, we view this announcement as good news since the cost and availability of GE Capital debt refunding was a major concern and the absence of equity injection reduces the probability of a cut to the dividend in the short term,” Coe, who rates the company “hold,” wrote in a note to investors late yesterday.

To contact the reporters on this story: Rachel Layne in Boston at
Last Updated: November 13, 2008 14:29 EST"
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