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GE Shareholders Can't Have Their Cake and Their Dividend, Too

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You can have government involvment or a dividend cut. Not both.

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I listened with interest yesterday to a major financial news broadcast of the General Electric (GE) shareholders' meeting. Evidently, shareholders were upset at, among other things, the reduction in GE's dividend and the support from GE-owned networks for government involvement in the economy.

Now, I feel the pain of GE shareholders who have come to depend on the company's dividend for living expenses. I really do.

But there's entitlement, there's delusion, and then there's a GE shareholder upset both about dividend reduction and government involvement.

Because here's the thing:

GE has been borrowing for years to pay its dividend. Maybe, maybe not, with that direct, explicit purpose. But the company has been growing its balance sheet and buying real estate in recent years - real estate that's purchase price was far higher than what it's worth now. It was, of course, buying that real estate with borrowed money - subsidized borrowed money at that.

The first subsidizer was the collection of ratings agencies who gave GE the AAA imprimatur, even as the credit markets were far more skeptical. That AAA rating allowed GE to advertise directly to retail investors with an assurance of creditworthiness not borne out by the facts.

More recently, though, GE has borrowed explicitly with government backing. Without that capability, it's likely the dividend would have been cut further and the stock would be a lot lower.

It's a free country -- yes, it still is -- and you can complain about whatever you want.

But if you're a GE shareholder, and you're complaining about both your dividend cut and government involvement, you need to re-examine your argument.
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