General Motors: Buyback and Dividend Increases Signal Optimism About the Future

Key Morningstar Metrics for General Motors

• Fair Value Estimate: $81.00
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: High

What We Thought of General Motors’ Earnings

On Feb. 26, General Motors GM updated its capital allocation plans with a $6 billion increase to its share repurchase authorization, which had about $300 million remaining at year-end 2024, and a 25% increase of its quarterly dividend to $0.15 per share starting in April. We are increasing our fair value estimate to $81 per share from $80 on the time value of money and a lower share count after increasing our 2025 buyback spending forecast to $3 billion from $2 billion.

Of the $6 billion repurchase increase, $2 billion will be via a new accelerated share repurchase program. GM finished a $10 billion ASR announced in November 2023 in the fourth quarter of 2024. We don’t believe a new ASR was essential to execute a $2 billion buyback, but the ASR is a binding commitment to the market that $2 billion in buybacks will occur this year, hence GM’s stock rising over 5% during Feb. 26 premarket trading.

GM will pay the banks managing the ASR $2 billion on Feb. 27 and $1.6 billion will immediately be spent, with the remaining $400 million spent no later than June 30. This ASR is a much shorter term than the $10 billion one, which lasted nearly a year. At a theoretical price of $49 per share, the initial tranche would repurchase about 32.7 million shares, or about 3.3% of outstanding stock. The exact number of shares repurchased with the remaining $400 million depends on the daily volume weighted average of GM’s stock price during the ASR less an undisclosed discount given by the banks.

We were already modeling $2 billion in 2025 share repurchases but now model $3 billion to assume $1 billion of buybacks beyond the ASR. The open market repurchase program has no expiration date and has $4.3 billion remaining excluding the ASR portion. In 2024, GM did open market buybacks in addition to the ASR, so we think that will occur again in 2025. The buyback and dividend increase is a sign that GM is not panicking over 25% tariffs on Canadian and Mexican imports into the United States, which may start on March 4.