General Electric Co. is cutting its third quarter dividend by 68 percent, a move that will save the struggling conglomerate $9 billion a year.
GE, one of the nation's largest companies, said Friday it will pay shareholders a 10-cents-per-share dividend beginning in the third quarter, down from the company's original plan of 31 cents.
The move, first reported by CNBC, had been widely expected in recent weeks as the company coped with falling profits. GE is the parent company of CNBC.
In a statement Friday, CEO Jeff Immelt said that GE cut its payout to strengthen its balance sheet and provide "additional flexibility." He said GE does not have plans to raise any additional equity following the dividend cut.
"We believe it is the right precautionary action at this time to further strengthen our company for the long-term," Immelt said in the statement.
The company, which has paid a dividend for more than 100 years, had long deflected calls that it slash its dividend amid the financial crisis. But Wall Street analysts have said GE may not have enough free cash for its promised annual payout of $1.24 per share due to mounting losses at its GE Capital lending unit.
After months of defending the dividend plan, Immelt indicated earlier this month that GE would reevaluate its shareholder payments for the second half of the year. The company has said it will pay 31 cents per share for the first two quarters of 2009.
GE Capital, which makes a wide range of loans, from overseas home mortgages to big energy projects, has suffered during the banking and credit crisis. GE is in the process of restructuring GE Capital, cutting jobs, injecting money into the unit and reducing its dependence on risky debt.
The broad recession is also eating into profits at the company's industrial unit, which makes aircraft engines, home appliances, light bulbs and wind turbines. GE says it expects profits could be flat in its industrial businesses this year.
Those problems have also put GE's top-notch 'AAA' credit rating under scrutiny, and it is under review by ratings agencies because of GE Capital's problems. Many analysts believe that a rating cut could come as early as this year.
GE shares have plummeted over the past year, trading at their lowest levels since the mid-1990s.
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