Why General Electric Stock Lost More Than 25% in November
What happened
Shares of General Electric (NYSE: GE) tumbled 25.7% in November, according to data provided by S&P Global Market Intelligence. That brought the company's losses for the year to an even 57%.
GE's shares have been on an ever-worsening downward trend since January 2017, when its stock was trading at about $32 per share. Since then, the stock has lost more than 75% of its value, closing out November 2018 at just $7.50 per share. Ouch!
Once a top industrial stock, General Electric has badly underperformed the market in recent years. Image source: Getty Images.
So what
GE saw a small boost to its share price at the beginning of October, when the board made the surprise decision to oust CEO John Flannery -- who had been at the company's helm for just over a year -- and install board member Larry Culp as new CEO. Culp, who joined the board in April, had a long and successful tenure as CEO of industrial conglomerate Danaher.
But the honeymoon didn't last, particularly after GE reported disappointing earnings on Oct. 30. During the earnings call, Culp announced that GE's storied dividend was being slashed to just a penny per quarter or $0.04 per year. At $7.50 per share, that's a yield of just 0.5%. Culp also offered no new plans for a turnaround, instead pointing to Flannery's plan as the roadmap the company would follow. Finally, he refused to offer a full-year profit forecast.
With no dividend left to speak of and concerns mounting about GE's debt and valuation, institutional and retail investors began to exit the stock. Culp admitted as much on Nov. 12 in an interview on CNBC. "When we announced on our earnings conference call that we were taking our dividend down to 4 cents a year, we didn't do anything positive for our retail shareholder base and they have been exiting the stock, I think, as a result," he said.
Now what
GE's stock has fallen even further since the end of November and is now trading at less than $7 per share. Culp is still "the new guy," but the market isn't giving him any grace period to learn the ropes. And even if the company does manage to execute its asset sale and debt reduction plans quickly and effectively -- neither a guarantee -- GE will still have a long and tough road back to growth and hardly any dividend with which to reward investors for their patience.
Right now, it looks like there are lots of better investment opportunities than this fallen giant.
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John Bromels owns shares of General Electric. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
