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GM jumps after reinstating quarterly dividend and increasing share buybacks

GM jumps after reinstating quarterly dividend and increasing share buybacks
Dino Kurbegovic

General Motors (NYSE: GM) will bring back dividends, initially cut during the first days of the Covid pandemic to preserve cash; though, this time around, it will be at a much lower rate. 

The amount given to shareholders per share of the company stock will be $0.09, compared to the last one paid out in 2020 of $0.38, a reduction of 76% the firm announced on August 19. 

Furthermore, the company confirmed that it would resume opportunistic share repurchases, or share buybacks, increasing the repurchase program to $5 billion, from the previously announced $3.3 billion.

GM Chair and CEO, Mary Barra, said:

“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. 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.”

At the time of writing, the stock is up 1.5% in premarket trading, after the news of the dividend and buybacks broke. 

GM premarket data. Source: Nasdaq

GM chart and analysis 

GM is currently showing a bull flag pattern; a bull flag pattern occurs when prices pull back slightly after a strong rise up, potentially offering an opportunity for entry. The short-term trend is positive, while the long-term trend is still negative.

Overall, the technical analysis highlights the support zone from $36.76 to $37.16 and the resistance line at $38.79. 

GM 20-50-200 SMA lines chart. Source. data. See more stocks here.

Analysts rate the shares a ‘moderate buy,’ predicting that the average price in the next 12 months could reach $48.07, 24.15% higher than the current trading price of $38.72.

Wall Street analysts’ price targets for GM. Source: TipRanks  

Dividends for the masses

As the company states, the reinstated dividend will be paid on September 15 to shareholders of record as of the close of business on August 31. 

Equally important, GM is down 34% year-to-date (YTD), while the firm is struggling with supply chain issues and chip shortage that has been ailing the entire auto industry. 

Having these developments in mind, the timing of the dividend and the amount speaks volumes about where the stock and the company could be headed in the short term. 

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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk. 

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