GE shares tumble, company confirms 2009 dividend

By Scott Malone

BOSTON (Reuters) - General Electric Co (GE.N) confirmed on Thursday it plans to pay a dividend through the end of 2009, but shares of the U.S. conglomerate remained down sharply.

GE shares tumbled to a fresh lows in midday trading dropping more than 10 percent, or $1,68, to trade at $14.61 on the New York Stock Exchange after market rumors circulated that the conglomerate was considering changing its dividend.

The company, which last year generated about half its profit from its finance arm, rebutted that claim in a statement posted on one of its Web sites, saying that its plan to maintain the 31-cents-per-share quarterly dividend through the end of 2009 was "unchanged".

"GE expects industrial cash flow to be greater than the amount needed to fund the dividend in 2009," GE said in a statement posted on GEReports.com, a Web site it has been using to respond to reports on the company in the financial press.

The Fairfield, Connecticut-based company's industrial arm, which makes jet engines and windmills, railroad engines and equipment used in oil and gas production, has remained on a solid growth path even as GE Capital, the company's finance arm, has stumbled.

GE shares were down $1.25, or 7.7 percent, at $15.04 on the New York Stock Exchange, after earlier hitting a low of $14.66 -- its lowest point since September 1996, adjusted for stock splits -- amid market rumors that the company was considering cutting its dividend.

GE's dividend yield of about 7.6 percent is the second-highest in the Dow Jones industrial average .DJI, behind Pfizer Inc (PFE.N)'s 8 percent yield. It also ranks near the top among 56 industrial peers, as measured by the S&P industrials index .GSPI, according to Reuters data.

"There's a widespread notion that the dividend may be revisited at some point," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey, explaining the rumor that had moved the stock. "Any mention of a discussion about the dividend in this market is not a positive for the stock."

'OTHER, BETTER WAYS TO GO'

GE watchers said they would have been surprised had the company cut its dividend.

"I would view that as a tremendously last-resort kind of measure," said Daniel Holland, equity analyst at Morningstar in Chicago. "There are other, better ways to go out and get capital without damaging investor confidence."

The company's stock price has plunged this year as investors worry about troubles at its finance unit -- responsible for a stunning first-quarter earnings drop and a later cut to the company's profit forecast.

The shares are down 59 percent, a steeper drop than the 38 percent decline of the blue-chip Dow or the 43 percent fall of the broad Standard & Poor's 500 index .SPX.

Chief Executive Jeff Immelt said in a Thursday filing with the U.S. Securities and Exchange Commission he had bought another $821,244.46 worth of GE shares.

The slide has continued despite many steps by the company intended to soothe investor worries about its financial standing, including Wednesday's news that the company had received the backing of the Federal Deposit Insurance Corp for up to $139 billion of GE Capital debt.