GM investors can look forward to a 33-percent increase in the dividend the automaker pays on its common stock beginning in January 2024, a according to a business update issued this morning by the company.
Additionally, GM says it is launching an accelerated share repurchase program or ASR, with $10 billion earmarked for stock buybacks over the course of the program.
The General’s common stock shares currently pay a 9-cent per share dividend each quarter to shareholders of record. Following the upcoming dividend boost, each share will pay a 12-cent dividend, a three-cent increase over the previous amount.
Furthermore, the share repurchase program will see the banks tasked with executing the plan buy back $6.8 billion worth of common stock “immediately.” For those who are unaware, the repurchased stock will be “retired” or eliminated from the pool of available shares, a process reducing the number of outstanding shares and thus increasing those shares’ value.
Bank of America, Goldman Sachs, Citibank and Barclays will carry out the share repurchase program. The program is expected to be complete sometime in the fourth quarter (Q4) of calendar year 2024. About 1.37 billion shares of common GM stock are outstanding as of the buyback’s start.
The General says it has an additional $1.4 billion remaining from previous allocations it made for stock repurchases. This money, it says, will be used “for additional, opportunistic share repurchases.” The automaker canceled a revolving credit facility of $6 billion and will replace it with a $3 billion committed credit facility.
CEO Mary Barra struck a positive note in the remarks she made to accompany the release, observing the company “will deliver very strong profits in 2023 thanks to an exceptional portfolio of vehicles that customers love and our operating discipline.”
GM reinstated its 2023 earnings guidance, which it had previously withdrawn, now taking into account an expected $1.1 billion from the recent or UAW strikes and contract ratification. Its full-year earnings guidance includes the following points (with earlier guidance figures in parenthesis):
- Net income: $9.1 to $9.7 billion ($9.3 to $10.7 billion)
- Diluted earnings per share: $6.52 to $7.02 ($7.15 to $8.15)
- Cash from operating activities: $19.5 to $21.0 billion ($17.4 to $20.4 billion)
- Free cash flow: $10.5 billion to $11.5 billion ($7 to $9 billion)
- Capital spending: $11.0 to $11.5 billion ($11 to $12 billion)
Mary Barra added that GM is “finalizing a 2024 budget that will fully offset the incremental costs of our new labor agreements” while cutting capital expenditures, increasing efficiency, and minimizing costs.
She says this made the dividend increase and share buyback possible, concluding, “with this clear path forward, and our strong balance sheet, we will return significant capital to shareholders.”
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Comments
It’s about time I remember the days when GM paid the highest dividend in the industrial segment.
back in the day, when there were almost no foreign cars on the road, The big3 have lost a significant amount of marketshare in the US market. Toyota, VW, KIA, stellantis, then GM and Ford are the worlds largest automakers.
Tesla is now ranked 15th in the world.
That’s when it was GM not gm. The lowercase letters they adopted are ironically very appropriate for a company that’s a shadow of its former glory days.
Nothing like covering your mistakes with artificially propping up the price of your stock.
GM stock is so undervalued, you could argue for an even bigger share buyback. If your stock is trading at a P/E ratio of under 5 like GM is, stock buybacks are probably the best possible investment.
Tesla is the opposite, they are so overvalued that they should probably be selling more stock to the suckers propping up the price so far above fair value.