General Motors (GM) announced on January 14 that it will pay investors a quarterly dividend of 30 cents per share, its first since 2008. The car maker suspended paying dividends five years ago in an effort to save money during the recession.
In a relatively short period of time, GM went through and came out of bankruptcy, received a government bailout and then posted a profit. In December 2013, the Treasury sold its final stake in the company, which was the last step before GM could resume paying its investors a dividend.
The company's top rival, Ford, resumed paying a dividend in March 2012 after suspending their operation five years before.
"Today's General Motors is designing high-quality, world-class vehicles for our customers and delivering consistently solid financial results," outgoing GM CEO Dan Akerson said in a statement. "The board understands that our investors should share in this success and is pleased to announce a quarterly dividend for our common stockholders."
Immediately after the announcement, GM shares rose 3 percent. They have since dropped after the company said its 2014 profit margin would be the same as last year.
The dividend will cost GM about $1.7 billion a year and will be paid at the end of March to investors who hold stock as of March 18. Financial analysts also speculate that the dividend reintroduction will attract new investors who prefer to buy stocks that generate income.
Since its low point during the financial crisis, GM has become more stable and many would consider it to be a safe investment. To truly minimize risk, however, individuals should consider using SmartStops' software to develop adaptive exit strategies.
Categories: Stock News