WASHINGTON - For the first time since the Great Depression, General Electric Co. is cutting its quarterly dividend, a move that allows the struggling conglomerate to save $9 billion a year.
GE, one of the nation's largest companies, said Friday it will pay shareholders a dividend of 10 cents per share beginning in the third quarter, 68 percent lower than the company's original plan of 31 cents.
The dividend cut -- long predicted by Wall Street -- is the company's first since 1938 and follows similar actions by other industrial companies amid the worst financial crisis in seven decades. Dow Chemical Co. announced its first dividend cut in 97 years earlier this month.
In a statement Friday, CEO Jeff Immelt said GE's board of directors cut the payout to strengthen its balance sheet and provide "additional flexibility." GE is trying to protect its top 'AAA' credit rating despite growing doubts over the stability of its GE Capital lending unit.
Shares of the Fairfield, Conn.-based company fell 59 cents, or 6.5 percent, to close at $8.51 Friday. The stock price has plummeted over the past year, trading at its lowest levels since the mid-1990s.
Analysts had questioned GE's ability to pay a generous dividend while it hunted for money to shore up GE Capital. The unit, which makes a wide range of loans, for overseas home mortgages and big energy projects, has suffered during the banking and credit crisis. GE is restructuring that business by cutting jobs, injecting it with more cash and reducing its dependence on risky debt.
GE Capital was the largest profit driver at the company in recent years, but has suffered mounting losses on growing loan defaults.
GE, which has paid dividends every quarter since 1899, said in December that its dividend would cost $13.4 billion out of a projected 2009 cash flow of $16 billion.
