The U.S. conglomerate said that it had no plans to raise additional equity, and that reducing its dividend from 31 cents a share would save it about $9 billion a year.
The news had been widely expected on Wall Street even prior to GE's statement earlier this month that its board would re-evaluate the payout.
Shares of GE, the world's largest maker of jet engines and electricity-producing turbines, were down 44 cents or 4.8 percent at $8.
66 on the New York Stock Exchange on February 27, above an earlier low of $8.40.
"We have determined that reducing the dividend... is a prudent measure to further enhance our balance sheet and provide us with additional flexibility," said Chief Executive Jeff Immelt in a statement.
Credit-ratings agency Standard & Poor's, which has GE's triple-A status on review, said its negative outlook was not changed by the dividend reduction.
As recently as January, Immelt had defended the dividend. In November, the Fairfield, Connecticut-based company said it planned to pay the 31-cent quarterly dividend through 2009.
Still, troubles at its GE Capital finance unit had led some investors to wonder whether keeping the dividend was a good idea.
"I am personally happy to see it happen, even though we are a big shareholder," said Peter Sorrentino, senior vice president and portfolio manager at Huntington Asset Advisors, in Cincinnati. "It'll give them the ability to weather this storm better... I know that it's in vogue to maintain a dividend, but that should never come at the expense of the franchise."
A GE spokesman said the deteriorating world economy had prompted the move on the dividend.
"The global economic environment has continued to deteriorate, unemployment has increased and there's continued uncertainty related to the government's response to the crisis," spokesman Russell Wilkerson said in a phone interview. "Factoring all of those issue and challenges, the board decided it was the right time to make this decision."
The news comes at the end of a week that saw JPMorgan Chase & Co and Textron Inc slash their dividends as well in an effort to preserve capital.
The dividend cut leaves investors facing one more big question about GE, which is the only original component of the Dow Jones industrial average to remain in that widely-watched indicator. That is whether GE could lose its coveted triple-A credit rating.
Both Standard & Poor's and Moody's Investors Service are reviewing GE's top-tier ratings.
That would be a further blow to GE, said Matt Collins, capital goods analyst at Edward Jones in St. Louis.
"We would still anticipate a debt downgrade," Collins said. "Borrowing costs do go up in that scenario."