Just a few years ago, General Electric was a popular dividend stock. Then it slashed its dividend by a total of 96% in the span of 12 months.
As a result, most dividend-focused investors have taken their money elsewhere. After all, GE stock now pays a quarterly dividend of just $0.01 per share, putting its yield at a paltry 0.4%. Nevertheless, GE could be an excellent dividend growth stock for investors with a long-term mindset.
A terrible dividend stock in recent years
GE imploded in spectacular fashion a few years ago, following numerous missteps over a period of many years. First, the storied industrial conglomerate made several bad acquisitions. The businesses it purchased turned out to be cash pits, and GE ran up a huge debt load in the process of buying them. (Ill-conceived share buybacks aggravated this problem.)Additionally, weak market conditions and poor business decisions led to losses in some of GE’s other business lines. Meanwhile, low interest rates caused its pension plan to become severely underfunded. Lastly, the company discovered a massive shortfall in the reserves for its legacy insurance business, due to surging long-term care costs.
