General Electric (NYSE: GE) is likely to be dropped from the Dow Jones Industrial Average, said Deutsche Bank analyst John Inch. The analyst warned of "headline risk" if GE were to be dropped -- potentially amplified by GE’s high mix of retail investors. Roughly 40% of GE’s common stock is held by retail investors.

"We believe the chances that GE could be removed from the Dow are increasing as GE continues to face substantial challenges including earnings and cash pressure, tough global power generation markets, aggressive downsizing, shrinking its portfolio, management shake-up and SEC investigations," said Inch.

The index is intended to represent the “best” large companies in the US, noted the analyst.

"The index is not market cap weighted but weighted by absolute share price. Consequently, apart from GE’s other challenges, as the company’s absolute share price has continued to drop (and as the share prices of the other companies have been increasing), GE increasingly falls into the category of outlier and consequently a likely candidate for removal, in our opinion."

Inch added, "In addition, the committee reportedly prefers for the Dow to incur no more than a 10:1 ratio between the component companies’ highest share price and lowest share price. Currently, the ratio between Boeing (the highest) and GE (the lowest) exceeds 20:1"

Deutsche Bank has a Sell rating on General Electric with a price target of $15.

For an analyst ratings summary and ratings history on General Electric click here. For more ratings news on General Electric click here.

Shares of General Electric closed at $15.95 yesterday.