Fallout: The Financial Crisis

Amid losses, GE still paying dividends

Alisa Roth Jan 23, 2009
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Fallout: The Financial Crisis

Amid losses, GE still paying dividends

Alisa Roth Jan 23, 2009
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TEXT OF STORY

Kai Ryssdal: General Electric is one of those stocks that’s got out-sized influence. It’s one of the Dow Industrials. It’s been thought of as a bellwether for the stock market for decades now. And it’s been a pretty solid company for just about as long.

Today GE posted massive losses for the fourth quarter. 2009’s not going to be any better. The exact phrase from CEO Jeff Immelt today was “extremely difficult.” Marketplace’s Alisa Roth has more from New York.


Alisa Roth: Look at what General Electric does and you realize its name is actually pretty apt. The company makes light bulbs and appliances. It also builds jet engines. And it owns most of the media giant NBC Universal.

Richard Sparks: But a significant portion of their earnings in recent quarters has come from their finance area. So it makes them vulnerable to the effects of the recent credit crisis.

That’s Richard Sparks. He’s an equities analyst with Schaeffer’s Investment Research. He says that’s part of why the company’s earnings fell by more than 40 percent in the last quarter. After all, what financial company’s doing well right now?

On the other hand, GE’s solid reputation means investors get nervous when it runs into trouble. Erik Ristuben is with Russell Investments.

Erik Ristuben: What you’re seeing with GE is just — it’s a name people know and it’s making people realize the economic weakness that we’re experiencing is now translating directly into earnings.

Even so, investors will still get a dividend from GE. The company says it has cash on the balance sheet and it’s the right thing to do. Ristuben says that’s a risky bet.

Ristuben: The reality is that, in most cases, the best balance sheet asset in terms of quality is cash.

And, of course, it takes cash to pay out dividends. Ristuben says it’s a calculation a lot of companies will have to make this year.

In New York, I’m Alisa Roth for Marketplace.

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