I’ve been rather outspoken of the horrible management at GE. Timing of acquisitions, playful accounting etc. But there may be a brighter future just past this roughest of spots.
I looked at recent dividend cuts to see if there was/is a pattern. What I found was that on average, stocks fall 4% on the announcement of a dividend cut, but most were already deep in the throws of an aggressive selloff when this happened. Now, this isn’t a perfect example, as I only had 17 stocks in the sample, but on that dip following the dividend cut, the average stock finished positive on the day!
Best case was KMI, which famously cut its dividend after lengthy discussions about if and when it might do the unthinkable. When the Houston pipeline giant made the cut its shares rallied. That’s not a misprint, it rallied (Several other stocks also rallied same day including WMB).
KMI cut from $.51 dividend to $.125 and that cut marked the bottom. This is why smart guys like Bill Nygren of Oakmark is buying GE now.
I’m not looking for GE to ZOOM, but I thought a nice bull call spread out 6 months or so may be a great way to play the turnaround that Bank America and others are now calling for.