GM, citing 'consistently strong earnings,' to reinstate dividend, resume stock buybacks
General Motors Co. is reinstating its quarterly dividend for shareholders after suspending it in April 2020 in response to the coronavirus pandemic, the Detroit automaker said Friday.
A dividend of 9 cents per share of the company's common stock will be paid out on Sept. 15 to shareholders of record as of the close of business on Aug. 31.
The automaker also said it will resume "opportunistic" stock buybacks. GM's board of directors increased the capacity under the company's existing buyback program to $5 billion of common stock. That's up from the $3.3 billion that had remained available under the program.
A stock buyback is another way for a public company to return money to shareholders, by buying shares of its own stock on the open market.
"GM is investing more than $35 billion through 2025 to advance our growth plan, including rapidly expanding our electric vehicle portfolio and creating a domestic battery manufacturing infrastructure," GM CEO and Chair Mary Barra said in a statement Friday. "Progress on these key strategic initiatives has improved our visibility and strengthened confidence in our capacity to fund growth while also returning capital to shareholders."
GM suspended its quarterly dividend and halted its share buyback program in April 2020 to conserve cash amid the COVID-19 pandemic.
In February, during the company's fourth-quarter earnings call, Barra said that "strong earnings and free cash flow even as we invest for growth naturally raises questions about resuming a common stock dividend."
But GM decided not to reinstate the dividend at that time because the automaker was focused on progressing with its electric and autonomous vehicle investments. GM is investing $35 billion through 2025 on EVs and AVs.
"Our clear priority is to accelerate our EV plan and drive growth," Barra said during that earnings call. "And we want to maintain maximum flexibility to invest as opportunities arise across our growth platforms."
In a statement Friday, Paul Jacobson, GM's chief financial officer, cited the automaker's "consistently strong earnings, margins and cash flow, our investment-grade balance sheet, and the achievement of several significant milestones in our growth strategy" as why the company now is opting to return money to shareholders even as it continues to invest heavily in electrification.
Recent developments on that front have included launching the all-electric GMC Hummer EV Pickup and Cadillac Lyriq; making the first customer deliveries of the BrightDrop Zevo 600 electric delivery vehicle; preparing for its first of four joint-venture battery plants to come online this month in Warren, Ohio; and the execution of binding battery raw materials agreements to enable GM to scale EV production to more than 1 million units of annual capacity in North America by 2025, among other moves.
Crosstown rival Ford Motor Co. also suspended its cash dividend in early 2020 in response to the pandemic. The Dearborn automaker reinstated a 10-cent-per-share dividend in the fourth quarter of 2021. The company's board declared a third-quarter dividend of 15 cents per share, payable on Sept. 1 to shareholders of record as of close of business Aug. 11.
Year-to-date, GM's stock is down almost 35%, although it gained 3.5% in trading Thursday and Friday, closing Friday at $39.70.