General Electric (NYSE:GE) investors may have thought they had it bad when the struggling industrial conglomerate announced last November that it would reduce its quarterly dividend by 50%, to $0.12 per share. In retrospect, that was just the warm-up act.

On Tuesday, in conjunction with reporting weaker-than-expected results for the third quarter, General Electric told investors it will slash its quarterly dividend all the way to $0.01 per share. That's a 92% reduction relative to its 2018 dividend, and 96% less than what GE was paying just a year ago. Here's what it means for investors.

Preserving cash as results remain weak

General Electric's third-quarter results represented a continuation of the business trends the company has seen over the past year. While the aviation business has been producing strong revenue and earnings growth and healthcare remains a steady performer, GE has been weighed down by its struggling power and renewables businesses.

In the power unit, revenue plunged 33% to $5.7 billion and segment earnings swung to a steep loss of $631 million, compared with a $464 million profit in the prior-year period. Orders fell 18% to $6.6 billion, but that was mainly driven by GE's recent asset sales. As for the renewable-energy unit, revenue jumped 15% to $2.9 billion, but margin pressure worsened, driven by a weak pricing environment. That performance caused segment profit to plummet 72% to $60 million.

A GE power turbine

GE's power business continues to struggle mightily. Image source: General Electric.

Cash flow was also weak, as GE's adjusted industrial free cash flow came in at $1.1 billion for the quarter. That leaves it just below breakeven on a year-to-date basis. General Electric tends to generate a disproportionate amount of its cash in the fourth quarter, because of the timing of deliveries, but management still warned that the company won't achieve its previous forecast of annual free cash flow around $6 billion.

It was in this context that General Electric decided to cut its dividend so dramatically. Reducing the quarterly payout to $0.01 per share will preserve cash to the tune of $3.9 billion a year. That will help the company strengthen its balance sheet by paying down debt.

GE didn't need to cut its dividend

While GE has made a dramatic change to its capital allocation policy -- at least for now -- the evidence still suggests that the company didn't exactly need to cut its dividend. Bears have repeatedly warned of a coming cash crunch, but that shows no signs of materializing.

Indeed, GE's cash balance increased slightly last quarter even though the company paid out more than $1 billion in dividends. The conglomerate's cash balance should improve further this quarter, thanks to the seasonality of its cash flow, while asset sales and spinoffs will provide substantial cash windfalls in 2019.

So why is the GE dividend being cut almost to zero? It's probably a combination of hoping to quell investors' fears about the company's cash situation and wanting to limit the damage to GE's credit rating. GE is presumably maintaining a small dividend so that institutional investors that can only invest in dividend-paying stocks aren't forced to sell their shares, but there's no clear benefit to the company from paying more than that token amount.

It's important to note that GE's dividend cut is not forever. Following the planned spinoff of its healthcare unit in late 2019, that new company will offer a payout in line with its peers. What remains of the GE conglomerate will follow suit later.

Don't worry about the lost dividends

Income-focused investors will obviously be very disappointed by the news that GE is cutting its dividend for a second consecutive year. However, in the long run, capital appreciation is at least as important as dividends. And while the situation looks grim right now, I still believe that General Electric stock could double investors' money over the next several years.

The first key to that target is the planned spinoff of GE Healthcare. New GE CEO Larry Culp intends to follow through on that front. The strong healthcare business should be able to achieve a much higher valuation as a standalone company than it currently gets from investors. Indeed, the 80% stake that will be distributed to GE shareholders could be worth about $4 per share.

The continued growth of the aviation business represents the second key to a GE stock rebound. The aviation segment has produced $4.7 billion of profit on $22.1 billion of revenue year to date, up 19% and 11%, respectively.

This rapid growth will continue for the foreseeable future. The aviation segment has a massive backlog, because of rising global demand for air travel. The backlog continues to expand, with $26.8 billion in new orders booked in the first nine months of 2018. Over time, strong profit growth in aviation will more than make up for the reduced profit prospects of GE's challenged power and renewables segments.

Adam Levine-Weinberg owns shares of General Electric. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.