I have long been intrigued by profitable businesses that cut their dividends. This is because many investors fail to realize that the recovery characteristics of a business change for the better when a business in distress is suddenly able to retain profits to rebuild rather than shipping out cash to shareholders due to dividend expectations that were created by declaration of the Board of Directors in many years past.
In the case of General Electric, it is a company that is slated to earn $7 billion in profits in 2019. Yes, that is heavily reduced from prior expectations calling for $9 billion in profits in 2019 before the company revealed that it had a $26 billion shortfall to make up due to poor estimates with its long-term care insurance arm. And yes, that figure was well below the amount of dividends that GE was paying out just a few years … Read the rest of this article!