GM Stocks Gain 6% As Automaker Announces a 25% Dividend Increase
Stocks for General Motors (GM) gained over 6% in February 26 trading after the automobile maker announced a $6 billion stock buyback plan. The stock buyback plan includes a $2 billion accelerated share repurchase program.
The company also announced a 25% GM dividend increase in a bid to reward investors amidst dipping sales revenues and profits, CNBC reported
GM Shareholder Returns
GM announced a 25% increase of its quarterly dividends to 15 cents per share. This increase saw GM dividends match those of its rival, Ford Motors. The car maker plans to implement the new dividends in the next payout whose schedule will be announced in the month of April. The company also said that the General Motors stock buyback will take place in phases. The vehicle manufacturer expects to complete the initial $2 billion stock buyback in quarter two of 2025.
“The GM team’s execution continues to be strong across all three pillars of our capital allocation strategy, which are to reinvest in the business for profitable growth, maintain a strong investment grade balance sheet, and return capital to our shareholders. We are growing our business thanks to our broad, deep, and compelling portfolio of ICE vehicles and EVs,” GM CEO Mary Barra said.
Last month, Barra indicated that GM will keep returning shareholder capital in 2025 subject to board approval. The company has been running stock buyback programs since 2023. This has seen it retire over 1 billion outstanding shares.
Market Performance
Even with the stock buy back program and strong quarterly results that regularly surpass Wall Street estimates, GM stocks have lost over 12% of their value this year alone. Analysts have attributed this drop to plateauing sales, uncertainties in the regulatory environment, and shrinking growth opportunities.
GM will advance a total of $2 billion to executing banks – Barclays and JP Morgan – to buy back and retire common stock through the accelerated share repurchase program.
The final number of stocks bought back will be determined by GM’s average trading price throughout the program. The company will remain with $4.3 billion for additional share buy backs. The company met its GM stock repurchase target for 2024, closing the year with less than a billion shares outstanding.
“We feel confident in our business plan, our balance sheet remains strong, and we will be agile if we need to respond to changes in public policy. The repurchase authorization our board approved continues a commitment to our capital allocation policy,” GM CFO Paul Jacobson said.
Analyst Perspectives
Wall Street analysts hold that by authorizing the stock repurchase program, GM has taken the right step at the right time.
Commenting on the stock buy back news, Barclays analysts said, “We assume GM was waiting for better trade clarity on new authorization. Depressed stock multiples provide a good opportunity for buy backs.”
UBS holds that the news would be received positively by the market and that they serve as the catalyst that investors seek.
“We are a little surprised by the timing. We had thought the company would wait until there was a little more policy clarity. The announcement now could be taken as a sign of GM’s confidence in FCF generation,” wrote UBS.
Morningstar analysts said GM’s decision to repurchase shares and raise dividend is aimed at building investor confidence.
“GM wants to show a lot of conviction to the market that they believe in the future of the company, regardless of things like cyclicality” or fears of the effects from tariff threats made by the Trump administration. The dividend increase further shows confidence and suggests regular annual increases early each year are possible since they’ve done that in early 2024 and 2025,” Morningstar Analyst David Whiston said.
In 2025, GM’s capital spending is estimated to be between $10 billion and $11 billion. This includes joint venture investments in battery cell manufacturing. The company plans to spend over $8 billion in research and development.
