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Why General Electric Company's Stock Plunged 7% Today

By Travis Hoium - Updated Oct 23, 2017 at 3:49PM

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Will new management mean a dividend cut for one of the world's biggest blue chips?

What happened 

Shares of General Electric Company (GE -1.85%) dropped as much as 6.7% in trading Monday as Wall Street analysts rushed to downgrade the stock and cast a shadow over its dividend. Shares were at their daily low at 2:40 p.m. EDT and are trading at a level not seen in four-and-a-half years. 

So what

Analysts at Morgan Stanley, UBS, and Deutsche Bank all downgraded GE's stock rating or earnings expectations today as they became uncertain about the company's dividend. New CEO John Flannery has said that he may reduce GE's dividend to retain cash for organic growth and reduce pressure on the balance sheet. 

Wind turbines on a large hill above the clouds.

Image source: Getty Images.

GE has seen cash flow fall recently as it's tried to remake its business into an even bigger industrial powerhouse rather than a financial company. That may require management to lower both earnings and dividend expectations short-term, news traders are selling today. 

Now what

One of the challenges a conglomerate GE faces is that investors count on it for its dividend more than revenue or earnings growth. A 4.1% dividend yield today gives it an attractive yield for a blue chip stock, and if the company cuts that it could result in dividend investors jumping ship as well. With the uncertainty, I don't think this is a stock to jump on today, and there are more attractive dividend stocks with high yields on the market

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