General Electric said Tuesday it will "adjust" its dividend once a just-announced spinoff of its health-care business is completed.
GE shares rose in premarket trading after the beleaguered industrial conglomerate said it would shed GE Healthcare and sell its stake in energy company Baker Hughes. The company said it would focus on the aviation, power and renewable energy businesses.
But lower in the announcement, the company addressed its payout, a touchy subject for the company since any change to its policy could send long-time retail holders of the blue chip headed for the exits:
"GE expects to maintain its current quarterly dividend, subject to Board approval, until GE Healthcare is established as an independent entity. At that time, the new GE Healthcare Board of Directors will determine GE Healthcare’s dividend policy, which GE expects to reflect healthcare industry practices. Also at that time, the GE Board expects to adjust the GE dividend with a target dividend policy in line with industrial peers."
GE said the spinoff is expected to be completed within 12 to 18 months.
GE's current dividend yield is 3.8 percent, higher than industrial competitors Honeywell, United Technologies and Eaton at 2.07 percent, 2.25 percent and 3.48 percent, respectively. It's hard to tell what the new dividend yield will be once the health-care business is gone.
"We will continue to improve our operations and balance sheet as we make GE simpler and stronger," CEO John Flannery said in the announcement. (Flannery will be on CNBC at 10:30 a.m. ET Tuesday.)
The statement elaborates on how the CEO plans to do that, saying GE will reduce its net debt by $25 billion and maintain $15 billion in cash on the balance sheet. It aims for a net debt-to-EBITDA ratio of less than 2.5 times for its industrial business, according to the release.
GE cut its dividend in half last November, and the stock is down 38 percent since then. That drop and its lower payout is one of the reasons why it was booted from the Dow Jones Industrial Average, effective Tuesday.