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General Motors (GM) to Reinstate Dividend Payout, Hike Buyback
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On Aug 19, General Motors (GM - Free Report) announced its decision to restore the quarterly dividend for shareholders. The payouts have been suspended since the beginning of the pandemic in a bid to hold back funds.
The dividend was authorized on the company’s outstanding common stock at a rate of 9 cents per share. However, this marked a 76% reduction from 38 cents per share when the dividend payment was halted in April 2020. The first payment will be made on Sep 15.
General Motors also announced it will resume and increase its opportunistic share repurchases to $5 billion of common stock, up from the $3.3 billion previously remaining under the program. No specific timeframe was mentioned for the repurchases.
In April 2020, the auto giant had suspended dividend payout to reserve its cash at a time when the pandemic had forced auto factories and dealerships in the United States to remain partially closed. GM’s sales were badly impacted. The announcement to return to dividend payment reflects GM’s resilience and indicates that it is probably past the worst risks of the pandemic inflicted crisis. It is also a positive signal to investors of GM’s confidence to fund growth.
The company has cited the steady progress in the expansion of electric vehicles and domestic battery manufacturing as the reasons that have fueled GM’s strength and enabled it to get back to value creation for shareholders. Its $35 billion investment through 2025 to advance its progress in these key areas has fared well for the firm and improved its visibility and strength.
Shares of General Motors rose as much as 4% during trading early Friday. However, the stock has lost 17.6% over the past year against its industry’s 5% rise.
Image Source: Zacks Investment Research
GM’s peer, Ford Motor Co. (F - Free Report) , in October 2021, reinstated a quarterly dividend of 10 cents a share after suspending the payout in early 2020 in the face of the pandemic, just like GM. Presently, Ford pays a dividend of 15 cents a share and the shares yield nearly 4% and its dividend spending stands at roughly $2.4 billion a year. GM’s decision to pay 9 cents a share and an annual dividend spending of $500 million is somewhat more cautious and the shares will yield a little less than 1%.
Harley-Davidson has an expected earnings growth rate of 6.9% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 8.5% upward in the past 30 days.
Harley-Davidson’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. HOG pulled off a trailing four-quarter earnings surprise of 49.52%, on average. The stock has risen 4.2% in the past year.
BorgWarner has an expected earnings growth rate of 2.9% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 4.6% upward in the past 30 days.
BorgWarner’s earnings beat the Zacks Consensus Estimate in all of the trailing four quarters. BWA pulled off a trailing four-quarter earnings surprise of 29.45%, on average. The stock has declined 8.2% over the past year.
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General Motors (GM) to Reinstate Dividend Payout, Hike Buyback
On Aug 19, General Motors (GM - Free Report) announced its decision to restore the quarterly dividend for shareholders. The payouts have been suspended since the beginning of the pandemic in a bid to hold back funds.
The dividend was authorized on the company’s outstanding common stock at a rate of 9 cents per share. However, this marked a 76% reduction from 38 cents per share when the dividend payment was halted in April 2020. The first payment will be made on Sep 15.
General Motors also announced it will resume and increase its opportunistic share repurchases to $5 billion of common stock, up from the $3.3 billion previously remaining under the program. No specific timeframe was mentioned for the repurchases.
In April 2020, the auto giant had suspended dividend payout to reserve its cash at a time when the pandemic had forced auto factories and dealerships in the United States to remain partially closed. GM’s sales were badly impacted. The announcement to return to dividend payment reflects GM’s resilience and indicates that it is probably past the worst risks of the pandemic inflicted crisis. It is also a positive signal to investors of GM’s confidence to fund growth.
The company has cited the steady progress in the expansion of electric vehicles and domestic battery manufacturing as the reasons that have fueled GM’s strength and enabled it to get back to value creation for shareholders. Its $35 billion investment through 2025 to advance its progress in these key areas has fared well for the firm and improved its visibility and strength.
Shares of General Motors rose as much as 4% during trading early Friday. However, the stock has lost 17.6% over the past year against its industry’s 5% rise.
Image Source: Zacks Investment Research
GM’s peer, Ford Motor Co. (F - Free Report) , in October 2021, reinstated a quarterly dividend of 10 cents a share after suspending the payout in early 2020 in the face of the pandemic, just like GM. Presently, Ford pays a dividend of 15 cents a share and the shares yield nearly 4% and its dividend spending stands at roughly $2.4 billion a year. GM’s decision to pay 9 cents a share and an annual dividend spending of $500 million is somewhat more cautious and the shares will yield a little less than 1%.
Zacks Rank & Key Picks
GM carries a Zacks Rank #3 (Hold), currently.
Better-ranked players in the auto space include Harley-Davidson (HOG - Free Report) and BorgWarner (BWA - Free Report) , each carrying a Zacks Rank #2 (Buy), currently. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Harley-Davidson has an expected earnings growth rate of 6.9% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 8.5% upward in the past 30 days.
Harley-Davidson’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. HOG pulled off a trailing four-quarter earnings surprise of 49.52%, on average. The stock has risen 4.2% in the past year.
BorgWarner has an expected earnings growth rate of 2.9% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 4.6% upward in the past 30 days.
BorgWarner’s earnings beat the Zacks Consensus Estimate in all of the trailing four quarters. BWA pulled off a trailing four-quarter earnings surprise of 29.45%, on average. The stock has declined 8.2% over the past year.