The Future Of General Electric’s Dividend After The GE Capital Sale

If I were running General Electric, I would have chosen to spin off GE Capital to the existing General Electric shareholders as a tax-free spinoff rather than sell $150+ billion of the remaining GE Capital to outside buyers (principally Wells Fargo and Blackstone).

Spinoffs are preferable to asset sales because of tax efficiency. General Electric is going to record $16 billion in charges in connection to yesterday’s announced restructuring. Selling appreciated assets to Blackstone and Wells Fargo costs money, with estimates ranging from $4 billion to $6 billion in tax payments alone.

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General Electric To Sell Most of GE Capital

Yesterday was a classic example of why I do not spend anytime whatsoever discussing market timing, defined as the purchase or sale of stocks based on expected short-term price swings rather than conclusions formed by studying the business itself. At the time I am writing this, General Electric—a staple in pensions, trust funds, 529 educating plans, 401(k)’s, IRAs, and taxable accounts around the world—is up over 10.8% on the day, which is a heck of a jump for a company that is valued in the $250 billion range.

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