(Bloomberg) — General Motors Co . reinstated its dividend — at a sharply reduced level — and resumed share buybacks more than two years after suspending them to preserve cash in the early days of the pandemic.
The Detroit automaker will pay a quarterly dividend of 9 cents per share starting Sept. 15, according to a statement Friday. GM suspended its payout of 38 cents in April 2020. The company also restarted its buyback program, which will be expanded to $5 billion from the $3.3 billion remaining under the previous plan.
The decision was made in part because of the momentum GM is seeing in other efforts, including electric vehicle development and battery manufacturing, Chief Executive Officer Mary Barra said in the statement. “Progress on these key strategic initiatives has improved our visibility and strengthened confidence in our ability to fund growth while returning capital to shareholders.”
GM’s shareholder-pleasing effort reflects Barra’s confidence that the company can fund that turnaround while also committing to spending $35 billion on more than 30 plug-in vehicles by 2025 and four electric car battery plants .
Shares turned positive on the news, rising as much as 3.4% before regular trading in New York.
The moves come amid a difficult year for GM shares, which fell 34% by Thursday’s close as a shortage of semiconductors disrupted production and pressured sales. Rival Ford Motor Co., meanwhile, grabbed the spotlight in the electric vehicle race with the first electric pickup truck. Ford has reinstated its dividend at the end of 2021.
Given the rout in GM shares this year, the company had to give something to shareholders, but it would be difficult to return to a peak dividend that paid out $3.1 billion a year, Bloomberg Intelligence analyst Joel Levington said. The reinstated payout totaled about $525 million.
Below Forecast
The dividend was below Bloomberg’s forecast, which called for a quarterly distribution of 19 cents. By taking a more measured approach, the company can preserve cash in case the U.S. slips into a recession and as the launch of self-driving cars for GM’s Cruise division will require more capital.
“They’re trying to appease shareholders,” Levington said in an interview. But with additional capital needs on the horizon, “this is not really the time to put in heavy fixed cash payments.”
GM last month missed quarterly earnings expectations, dragging shares lower, although Barra said the company would meet this year’s adjusted earnings target of $6.50 to $7.50 per share. Investors see semiconductor problems as an ongoing risk, along with inflation and the risk of a recession.
(Updates with analyst comments in seventh paragraph)
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