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TEHRAN, June 20 -General Electric, the last original member of the Dow Jones industrial average, was dropped from the blue-chip index late Tuesday and replaced by the Walgreens Boots Alliance drugstore chain.
TEHRAN, Young Journalists Club (YJC) -General Electric, the last original member of the Dow Jones industrial average, was dropped from the blue-chip index late Tuesday and replaced by the Walgreens Boots Alliance drugstore chain.
The decision is a fresh blow to General Electric, which has stumbled badly in recent years. Last fall, John L. Flannery, the company’s new chief executive, warned that the power-generation unit was reeling. G.E. cut its dividend for only the second time since the Great Depression. In January, G.E. surprised investors by taking a big charge and setting aside $15 billion over seven years to pay for obligations held by GE Capital, the company’s financial services unit, mainly on long-term care insurance policies.
Over the last year, G.E.’s shares have fallen 55 percent, compared with a 15 percent gain for the Dow. G.E., which closed Tuesday at $12.95, has the lowest share price of any of the index’s 30 components.
S. & P. Dow Jones Indices — which owns the Dow — suggested that the slide in G.E.’s stock price contributed to the decision to remove the company from the index, where it had been a member continuously since 1907. The Dow is a price-weighted index, which means higher priced stocks have a greater influence on its direction.
“The low price of G.E. shares means the company has a weight in the index of less than one-half of one percentage point,” said David Blitzer, chairman of the index committee at S. & P. Dow Jones Indices. “Walgreens Boots Alliance’s share price is higher, and it will contribute more meaningfully to the index.”
The move also is freighted with economic symbolism. With the inclusion of Walgreens Boots, the index “will be more representative of the consumer and health care sectors of the U.S. economy,” Mr. Blitzer said.
The removal of G.E., which will formally occur June 26, reflects a shift in the economic composition of the United States, which long ago tilted away from heavy industry and toward services, such as technology, finance and health care.
And it also amounted to a milestone for General Electric. It was the last remaining original member of the index, when the stock market measure was introduced in 1896.
Back then, just a few years after the company was formed through a merger of Thomas Edison’s electric companies with a rival, G.E. was the modern-day equivalent of a technology stock, and the Dow itself was geared heavily toward the growth industries of the day such as railroads. In the more than 120 years that followed, the company was often at the center of American capitalism. And as recently as the 1990s. G.E. was at times the most-valuable American company by market value.
Source:nytimes
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