The news at General Electric Co. (NYSE: GE) still seems to be in a state of “bad” or “worse.” The news flow has not even gotten up to a “less bad” state yet. Now GE may be facing a further blow to its reputation, and it’s something that John Flannery may not want to have on his exit resume when he retires or leaves as GE’s chief executive officer.

GE may get kicked out of the Dow Jones Industrial Average. While the Dow is now an antiquated stock market index, and while the Dow’s calculations and composition have been questionable over time, no one inside of GE wants to see the company kicked out of the key index that the public still refers to every day.

Deutsche Bank analyst John Inch is joining the fold of professionals who believe the index may be closer to kicking GE out of its ranks. GE has been a Dow component since it started well over 100 years ago, and it is currently the only original member left.

According to Deutsche Bank, the firm thinks GE’s chances of being booted out of the Dow are increasing as the conglomerate continues to have mounting challenges. One serious issue is that GE has now endured two dividend cuts, and only one of those dividend cuts was during the recession. The most recent was at a time that the economy is seeing rekindled growth.

Another driver behind the expected cut is that GE is still planning on trimming its assets. It is on target, at least the company says so, to sell of another $20 billion or so in assets. And GE also recently disclosed that the U.S. Securities and Exchange Commission (SEC) was looking into its massive charges tied to long-term care insurance.

If GE gets booted out of the Dow, it will be an isolated reputational hit for GE rather than a blow to the broader market itself.

24/7 Wall St. looked further into this possibility that GE could be ousted from the Dow. Sadly, this is not the first time we have pondered the conglomerate’s future in the Dow (or as a standalone entity).

The Dow’s daily index calculations are based on each of the 30 components’ share prices. Almost all other indexes use a market cap-weighting rather than a share-price weighting. With a share price of close to $16, GE’s weighting in the Dow is now down to less than 0.5%. You could almost blow GE out of the index and no one would even know it — if you operate in a vacuum. GE now has the eighth lowest market cap of all 30 Dow stocks.

GE still matters more in the S&P 500 Index than in the Dow. That being said, its market cap is down to about $138 billion, after having lost more than $125 billion in market value over the past year or so. GE is now ranked 40th among the S&P 500 by market cap. The market cap of closer to $260 billion a year ago would have it ranked today as the 15th highest weighting in the index.

And on GE’s dividend being cut in half to 12 cents per share per quarter, GE was not even able to get its old 24 cent dividend prior to the 2017 cut back up to the pre-recession level of 31 cents per share — before GE cut its dividend to 10 cents. GE now has roughly the same dividend that it did in the year 2000, and some investors are still worried that Flannery may cut GE’s dividend again if it needs to conserve more cash or if it has more cash-charges ahead. In fact, Flannery said he would make whatever decision was necessary going forward and that all options are on the table.

The Dow is not different from other indexes in that its owners want their indexes to rise over time. When companies become too problematic and their share prices have been so bad, then the index committees have to decide whether a company has a future bright enough to remain in the index.

Now let’s take GE’s share price on the stock chart over time. GE shares peaked at almost $60 back in 2000. A weak economy made its value unsustainable, but when the terror attacks of September 11, 2001, hit GE shares went from roughly $40 to about $22.50 by February of 2003, and then they went back as high as $40 again in 2007 before the coming recession fears turned into reality. GE shares then bottomed out at about $7 during the March 2009 selling panic depths of the market, and GE shares went back up to about $33 as a peak in mid-2016. Now GE is half that price.

Let’s think about how you would feel if you were voting on whether a company should stay in the index and that company was GE. You have to weigh in a potential breakup that would make the company even smaller. You have to weigh lower and lower dividends than in the past, and it’s a stock that keeps seeing its share price recover to lower highs than in prior peaks. GE is likely to have even further underfunded pension costs, and GE may have more accounting charges after the SEC review and further internal reviews. And in general, an index voting committee has to consider that GE is more likely to have bad news for the foreseeable future than it is likely to have good news.

Maybe the only thing keeping GE in the Dow is that the index might want to keep at least one of its original members. And GE does still employ 131,000 people or so in the United States, out of its 295,000 global workforce in 170 countries.

Now if you get past the emotion, history, nostalgia and sentiment of GE’s role in the Dow and in American business history, there’s another reality that must be considered here. Maybe the only puzzle is trying to figure out how GE has not been booted out of the Dow already.

Stay tuned.

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