Should we have expected GE’s dividend cut?

In October of 2018, GE announced that they would be cut their dividend to $0.01 per quarter. Once a blue chip and a staple in many investor’s retirement account, this came as a shock.

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Source: Morningstar

There’s a general down trend over the years, but it’s clear that a good share of market participants were surprised by the cut. Let’s take a closer look at their payout ratio and dividend yield over the past 2 calendar years.

Source: Morningstar

As we can see from above, it looks like GE has been paying out over 100% of their net income for majority of this time frame. Naysayers may argue that net income is not a good representation of cash flow, and while that may be the case, I find it to be a pretty good proxy for a business like GE. With that being said, was I surprised that GE cut their dividend?

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