As shares of General Electric sink after slashing its dividend – four market experts weigh in on how investors should trade the stock
It’s looking dim for shares of GE.
The former industrial giant hit its lowest level in a nearly decade on Tuesday – briefly breaking below $10 – after the company cut its dividend to just one cent per share.
Here’s how four market experts are trading the move:
· Jack DeGan of Habor Advisory says that although the dividend cut was a necessary decision for the company, many of its investors will pay the price . » The street is not willing to wait for the 2 to 3 years for Mr Flannery’s plan to unfold. That’s just too long of a horizon for most investors to be patient, » he explained. » There are [a] very large percentage of shares owned by retired employees and individuals [that] were relying on the dividends. »
· Stephanie Link, Head of Global Equities Research at Nuveen believes that even though the stock has been under significant pressure it still has potential for a turnaround. « It trades at ten multiple and okay fine if you think those numbers have to come down, » she said. » « It’s still at a really reasonable valuation and you’ve got this leadership that is actually putting a game plan in place. »
· Josh Brown, CEO and Co-founder of Ritholtz Wealth Management, warns that from a technical perspective there’s no reason why individual investors should be buying General Electric. « This is a stock that on the charts has shown you absolutely no indication that it’s turning, » he explained. « There has never been any indication that the downtrend, which is now years, is showing any fatigue. »
· John Inch, Analyst at Gordon Haskett, says that GE’s tie up with the SEC and nearly tapped out dividend suggest more problems could unfold in the future. « Retail investors really should not be owning a name that is under accounting investigation and the company took an equity capital raise off the table, » he warned. » We think GE Capital is going to owe billions of dollars more in the future, we’re just starting to see the covers start to unravel here. »
Bottom Line: GE has a number of critical issues to work through before it looks attractive again. Investors should steer clear of the stock for the time being.
