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Cowen: Avoid General Electric Shares Because Its Dividend Is Not 'Safe'

Cowen: Avoid General Electric Shares Because Its Dividend Is Not 'Safe'
(Jonathan Weiss/Dreamstime)

By    |   Wednesday, 11 April 2018 01:53 PM

One Wall Street firm advises investors to avoid shares of General Electric because the company's financial difficulties look like they only will get worse.

"We don't believe the $0.48/year dividend is safe unless 'contract assets' convert to cash on a net basis, and/or the Power market rebounds sharply and soon," Wall Street firm Cowen says, according to CNBC. "We expect the upcoming accounting restatement and Q1 print to continue to pressure this 'show me' stock."

Cowen slashed its price target to $12 from $15 for GE shares, predicting the company will report first-quarter earnings below expectations. The firm also reaffirmed its market perform rating for GE.

"We expect the upcoming accounting restatement and Q1 print to continue to pressure this 'show me' stock," analyst Gautam Khanna wrote in a note to clients Wednesday. "We don't believe the $0.48/year dividend is safe unless 'contract assets' convert to cash on a net basis, and/or the Power market rebounds sharply and soon."

Uncertainty has been hurting shares in the faltering industrial powerhouse

However, late last month market rumors had Warren Buffett apparently interested in buying a stake in General Electric, Bloomberg reported.

For beleaguered investors, it was, if nothing else, a welcome reprieve from what’s been a brutal 15-month stretch of grim news, from tumbling demand for GE’s gas turbines to a probe of the company’s accounting by the U.S. Securities and Exchange Commission. That’s made GE the worst performer on the Dow Jones Industrial Average since the end of 2016, wiping out almost $168 billion in shareholder value in the process through late last month.

Buffett, who rode to GE’s rescue during the 2008 financial crisis, said earlier this year that he would consider an investment in the company or its assets if the price was right.

Buffett has been an investor in GE before. He helped inject capital into the industrial giant during the crisis by buying $3 billion in preferred shares, and received a common-stock holding once some warrants expired years later. Berkshire has mostly sold that stock, Buffett said in February.

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One Wall Street firm advises investors to avoid shares of General Electric because the company's financial difficulties look like they only will get worse.
cowen, general, electric, shares, ge, stock, dividend
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2018-53-11
Wednesday, 11 April 2018 01:53 PM
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