On Monday, 13 November 2017, before the opening bell, General Electric (NYSE: GE) finally faced up to the reality that it wasn't going to escape having to cut its dividend for the second time since the Great Depression. That made the company's stock price action for the day very different from what the company experienced just a few weeks ago, on Friday, 20 October 2017, when investors thought they were going to see a dividend cut, but were surprised when the company didn't follow through at that time.

Google Finance: GE Stock Price from 20 October 2017 through 13 November 2017

This is a cool chart because it reveals not just how investors reacted to the news of no dividend cut on 20 October 2017 and also to the news of GE's 50% dividend cut on 13 November 2017, but also how investors anticipated the move during the days in between, as GE's stock price declined by 12.17% before dropping by another 7.17% on the day of the dividend cut announcement. GE's stock price fell by 19.34% during just those 16 trading days.

That final decline came after a 25.11% decline in GE's stock price in the preceding 10 months since 23 December 2017. GE's total decline since that date now exceeds 40%, which puts the company's stock price decline on par with its just announced 50% dividend cut from $0.24 per share to $0.12 per share.

Meanwhile, all that occurred as the S&P 500 has risen by 14.33%.

For GE, the slashing of its dividend comes with the news that the company itself will become much smaller. And yet, analysts don't believe that the restructuring that GE's CEO John Flannery also announced on 13 November 2017 goes far enough.

GE kicked off the morning by announcing a 50 percent cut to its quarterly dividend, a major, if necessary, step for a company that prides itself on the payout and caters to a large number of individual investors. Looking at GE's projected 2018 numbers released just a few hours later, however, it's not clear the company cut deep enough.

The reduced dividend still costs about $4 billion annually. And while GE's targeting $6 billion to $7 billion in industrial free cash flow next year, that's based on a "cherry-picked definition", says Cowen & Co.'s Gautam Khanna. The real number appears to be close to zero if you account for pension and capital expenditures as other industrial companies would, he says.

To be able to sustain their dividend payments to their shareholders, companies need to have one of two things going for them: positive earnings (profits) that grow over time and/or sufficient cash flow. Without either, future dividend cuts become inevitable, where the expectation of those cuts will lead investors to pull down stock prices until they arrive or until the company's management can turn their earnings and cash flow situation around.

At this writing, it doesn't look like GE has quite found its bottom yet, which is why a good number of GE's more dividend-minded stock owners are selling their shares and are buying the stocks of other dividend-paying companies whose business outlooks are brighter.

“People who were in GE for their dividend may be looking for a better place to put their money,” said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.

Utilities .SPLRCU and consumer staples .SPLRCS rank among the sectors with the highest dividend yield on the S&P 500. They were also the largest percentage winning sectors on Monday.

We call that the conveyance effect, which occurs when investors act to sell their shares of a particular stock that is a component of a market capitalization-weighted stock market index and use the proceeds to buy shares of other companies within the index, with the result that the value of the index itself rises.

It happens all the time with the continual changes in the market cap weightings of individual stocks within an index, but usually not quite so visibly, where we have to thank the reaction of investors to a significant market event involving one of the more heavily weighted stocks of an index like the S&P 500 for making it obvious enough to be captured in a regular financial news report.

Previously on Political Calculations