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General Motors Reinstates Dividend

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General Motors Company (GM - Free Report) has finally reinstated its quarterly dividend, which was discontinued in 2008. The company announced a quarterly dividend of 30 cents per share, payable on Mar 28, 2014, to shareholders of record as of Mar 18, 2014.

The quarterly dividend translates into an annual dividend yield of about 3%, based on the closing share price of $40.02 as of Jan 14, 2014. The reintroduction of its dividend was highly awaited by investors, now that General Motors is free from government shareholding and is generating positive cash flows.

The announcement resulted in a 1.5% increase in General Motors’ share price to $40.16.

The reinstatement of dividend came on the back of General Motors’ strong balance sheet, stable earnings, high cash flows and ample liquidity. The automaker has more or less recovered from the effect of the recession and bankruptcy and has completed 15 consecutive quarters of profitable operations. The fourth quarter of 2013, whose results are scheduled to be announced before the market opens on Feb 6, 2014, is expected to be the 16th profitable quarter.

The cash flows of General Motors have also improved. During the third quarter of 2013, the company had a net cash flow of $3.3 billion from automotive operations, up from $3.1 billion in the year-ago period.

The company now intends to build a strong balance sheet that can provide ample returns to shareholders as well as endure the impact of any economic weakness.

General Motors’ peer, Ford Motor Co. (F - Free Report) , recently increased its dividend for the first quarter of 2014 by 25% to 12.5 cents per share. The new dividend will be paid on Mar 3, 2014 to holders of the outstanding Class B and common stock. The record date for the quarterly dividend is Jan 31, 2014. The increase amounts to a dividend yield of 3.2% per annum, based on the closing share price of $15.84 as of Jan 9, 2014.

General Motors, which carries a Zacks Rank #3 (Hold), is one of the largest automobile producers in the world along with Ford, Honda Motor Co., Ltd. (HMC - Free Report) and Toyota Motor Corporation (TM - Free Report) .

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