Corporations which don't keep improving their core businesses could go out of business.
That why equity shareholders have turned negative on dividends, as well as shares repurchases. They demand that funds be reinvested back into the business.
So, no surprise, GE has halved its quarterly dividend. During most of the Immelt era, the giant corporation has been struggling with a subpar stock price. In 2017 alone, it careened downward 35%
In this post-Immelt time boosting that price is job number-one for new head John L. Flannery. With this announcement, the stock did have an uptick.
As Joe Ciolli reports in BusinessInsider:
" ... a Goldman Sachs-curated basket of stocks spending the most on capex and research and development beat a similarly constructed index of companies offering high dividends and buybacks ... by 21 percentage points."
Another now-common tactic to boost the stock price is to conduct a massive reduction-in-force. That sends a signal to the investment markets that the corporation is serious about cost-efficiency. The latter positions it to manage pricing pressure.
What helped create former GE head Jack Welch's iconic brandname had been his gutting of many layers of manpower. The internal gallows humor during his era was that he was Neutron Jack. When he entered a GE facility, the workforce disappeared.
A RIF, of course, means more business for outplacement firms. They or their parent companies can be smart investments, especially if they are global. Currently, both Canada and India are experiencing a period of manpower cutbacks.
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