It is simple math: General Electric (NYSE: GE) is expected to generate about $7bn of operating cash flow from its industrial operations this year, and that comfortably covers some $4bn of capital expenditures, but yields only $3bn of free cash flow that has already been allocated to dividend payments under the key assumption that dividends received from GE Capital will not provide any relief in the fourth quarter, and excluding pension contributions.
(Source: The Daily Reckoning)
That picture clearly emerged from the latest call between the management team and financial analysts last week.
As you know, based on its quarterly payout schedule, GE currently needs $8bn annually, or $0.24 a share on a quarterly basis, to pay out dividends to investors -- and now the real risk is the quarterly dividends will be halved.
