General Electric Company (NYSE:GE) slashed its quarterly dividend Tuesday to just 1 cent a share starting in 2019, the second dividend cut in a year. The dividend cuts came as the struggling conglomerate once treasured by its shareholders for its hefty payouts missed third quarter earnings estimates and said federal regulators had opened a criminal probe of its accounting practices.
Executives revealed Tuesday the Justice Department had opened an investigation into the company’s recent accounting practices, alongside an investigation that has been under way at the Securities and Exchange Commission.
"Both the Justice Department and SEC are investigating a $22 billion charge the company booked in the third quarter tied to acquisitions in GE’s power unit, as well as a $6 billion charge in the first quarter for a shortfall in insurance reserves, GE’s finance chief Jamie Miller told investors on a conference call Tuesday," reported The Wall Street Journal.
For the quarter ended September 2018, General Electric reported earnings of $0.14 per share on revenue of $29.6 billion. The consensus earnings estimate was $0.21 per share on revenue of $29.9 billion. Revenue fell 11.6% compared to the same quarter a year ago.
New General Electric CEO Larry Culp acknowledged the results were "far from our full potential" and called for a heightened "sense of urgency and increased "accountability across the organization to deliver better results."
The company also said it will divide the power business into two units. General Electric took a writedown in the value of its GE Power business which lost $631 million in the quarter.
"My priorities in my first 100 days are positioning our businesses to win, starting with Power, and accelerating deleveraging," Culp said in a statement.
"We are moving with speed to improve our financial position, starting with the actions announced today. I look forward to updating you further on our progress in early 2019."
GE said it would separate its gas turbine and services business from other parts of the power business, a move that would effectively eliminate the Power headquarters structure.
The industrial conglomerate expects to retain about $3.9 billion of cash a year as a result of the dramatic dividend cut.
Contact Uttara Choudhury at uttara@proactiveinvestors.com
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-- Updates with Justice Department probe, CFO quotes --