The following is an excerpt from Andrew Bary | October 1, 2018 | Barrons.com |
Wall Street’s biggest bear on General Electric (GE) sees a good chance of a dividend cut and a potential equity raise following the industrial giant’s surprise CEO change Monday. GE named former Danaher (DHR) chief Larry Culp as chief executive, replacing an embattled John Flannery.
In a client note published today, JP Morgan analyst Stephen Tusa wrote: “While the change in leadership brings the company a step closer to where it ultimately needs to go for a real reset, the reset itself, and how potentially bad it actually is, is still in front of them (no financial details here), including a likely dividend cut and potential equity raise, in our view.”
GE shares rallied Monday on news of Culp’s appointment, rising 80 cents, or 7%, to $12.09, as investors bet that the well-regarded Culp can work his magic at GE. Culp headed Danaher, one of the best run industrial conglomerates, from 2000 to 2014, when its market value rose fivefold. Culp was GE’s lead director before being named CEO and chairman Monday.
GE now pays an annualized dividend of 48 cents, resulting in a yield of 4%. GE cut its payout in half in late 2017.
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