General Motors reinstates dividend and boosts share repurchase

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General Motors Company (NYSE: GM) is in the green this morning after the legacy automaker reinstated its quarterly cash dividend and announced an upsized stock buyback programme.

GM to buyback $5.0 billion worth of its stock

On Friday, the car manufacturer authorised $5.0 billion in share repurchase but did not disclose the time it will take to execute on that commitment. Reacting to the news, Joseph Spak – Managing Director at RBC Capital Markets said:

Investors have been pining for GM to take advantage of low valuation, so this should be well-received. Although this is just an authorisation (not actual share repurchase or accelerated buyback), we do expect GM to take advantage of the authorisation.

Last month, the Detroit carmaker reported better-than-expected revenue for its fiscal second quarter. Wall Street suggests that you buy General Motors stock as it has upside to $50 on average.  

General Motors reinstates dividend payments

GM declared a quarterly cash dividend of 9 cents a share on Friday; over 75% down from 38 cents it was paying before the pandemic.

That’s not too shabby, however, considering it plans on investing aggressively ($35 billion) in electric and autonomous vehicles through 2025. According to CFO Paul Jacobson:

Our consistently strong earnings, margins and cash flow, investment-grade balance sheet, and achievement of significant milestones in our growth strategy enables us to invest to accelerate our all-electric future while returning excess FCF to shareholders.

In July, General Motors partnered with LG Chem for 950,000 tons of cathode material; sufficient to build roughly 5.0 million EVs. The stock is down 40% from its year-to-date high in early January.

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