Mary Barra, President and CEO of General Motors Company (GM), speaks during the Milken Institute Global Conference in Beverly Hills, California, on May 2, 2022.
Patrick T. Fallon | AFP | beautiful pictures
ADVICE – Synthetic engine is restoring a quarterly cash dividend to shareholders that was cut to preserve funds in the early days of coronavirus pandemicalthough it will be at a much lower level than when it was suspended.
The Detroit automaker on Friday said GM’s board of directors has authorized a dividend on the company’s outstanding common stock at a rate of 9 cents per share. That’s a drop of about 76% from 38 cents per share when dividend has been suspended in April 2020.
GM also announced it would go ahead and increase its opportunistic share buybacks to $5 billion in common stock, up from the $3.3 billion remaining previously under the program. It does not specify a timeframe for redemptions.
Investors have questioned when GM’s quarterly dividend will be restored, especially after rival Ford Motor was knocked out. quarterly dividend recovery 10 cents per share to its shareholders in October 2021.
Wall Street responded favorably to the actions, sending the automaker’s shares up 4% to $40.28 a share in early Friday morning trading. Shares are still down about 33% this year.
“We believe investors are taking advantage of GM to take advantage of their low valuation, so this will be well received, although we note that this is only a share buyback authorization ( no actual share repurchases or quick buybacks, although we expect GM to take advantage of the authorization,” Joseph Spak said in an investor note Friday.
GM’s CEO Mary Barra earlier this year said that the company would “consider all opportunities to return excess capital to shareholders,” but the priority is to accelerate transformation plans that include investment $35 billion electric and self-driving cars to 2025.
In a statement Friday, Barra said progress on “major strategic initiatives has improved our vision and strengthened confidence in our ability to finance growth while paying return capital to shareholders.”
The company’s board of directors feels that 9 cents is an “appropriate” dividend as the company continues to invest in its transformation plan, according to GM spokesman Jim Cain.
The first dividend will be paid on September 15 to prominent shareholders since the end of business on August 31, according to the company.
“GM’s consistently solid earnings, margins and cash flow, our balance sheet and the achievement of several key milestones in our growth strategy allow us to invest heavily powerful to accelerate an all-electric future while helping to recover excess cash flow-free for shareholders, consistent with our long-term capital allocation strategy,” said GM Chief Financial Officer Paul Jacobson said in a statement.
The actions come as GM continues to address supply chain issues, including semiconductor chip shortages and waning investor confidence.
“We view this news favorably as it signals confidence in both the core business and the success of its investments,” Citi analyst Itay Michaeli said in an investor note. EV/AV investment is ongoing,” Citi analyst Itay Michaeli said in an investor note, reiterating GM as “the top pick”.
– by CNBC Michael Bloom contributed to this report.