The General Motors board approved a buyback of up to $6 billion of the automaker’s outstanding common stock, the company announced in a press release Tuesday.
The buyback could make GM’s stock more attractive to more long-term investors, creating a potential upside to the stock as the automaker invests in its electrification strategy. For long-term investors, buybacks often help increase returns over time.
The buyback may also help GM boost its current share price, as well increase its earnings per share. In the first quarter of 2024, GM increased its common stock dividend by 33%, representing a modest increase from 9 cents to 12 cents per share.
GM’s stock price jumped to over $48 a share after the buyback announcement Tuesday. The company’s stock is now up 35% year to date.
GM’s share buyback announcement follows strong first quarter performance in 2024. In April, the automaker reported record high first-quarter revenue of $43 billion and income attributable to stockholders of $3 billion.
But GM expects to continue to make significant investments in electrification. The automaker’s 2024 financial guidance includes expected capital spending of $10.5 billion to $11.5 billion, including investments in the company's battery cell manufacturing joint venture Ultium Cells.
“The investments GM made in its brands and product portfolio over the last several years, and the company’s operating discipline, are delivering consistently strong revenue growth, margins and free cash flow,” said GM CFO Paul Jacobson, in the press release. “We are very focused on the profitability of our ICE business, we’re growing and improving the profitability of our EV business and deploying our capital efficiently. This allows us to continue returning cash to shareholders.”
The $6 billion share buyback follows a $10 billion accelerated share repurchase announced in November 2023. It was intended to help offset some of the labor costs as part of GM’s new contract with the United Auto Workers agreed to last fall, which the automaker expects will cost around $9.3 billion through 2028.
GM still has approximately $1.4 billion in outstanding shares still remaining under this prior repurchase authorization from last November. The new buyback will allow GM to strategically repurchase new shares after its previously announced $10 billion share repurchase is complete.
GM said it repurchased $0.3 billion in shares in Q1 and expects to buy the remaining $1.1 billion before the end of the second quarter.
Prior to the November ASR, GM had approximately 1.37 billion shares of common stock outstanding.
