Skip to Content
Stock Analyst Update

GM's Dividend Suspension Prudent Given Closed Plants

The move to us is about debt extension, and we believe it does not create new funding for the automaker.

Mentioned:

GM (GM) announced on April 27 that it is suspending its dividend and share repurchase program, and we are leaving our fair value estimate unchanged. Neither move is shocking given GM’s North American factories are closed due to COVID-19. We also think the move became more likely once the UAW said last week it was not comfortable with its members returning to work in early May. The move saves GM nearly $2.2 billion of annual dividends, with 2020 savings of about $1.6 billion given first quarter’s dividend already paid. The company also said $3.6 billion of its $4.0 billion credit line due in April 2021 is now due in April 2022. GM now cannot buyback stock as long as any amounts are drawn on this line and two other lines, nor can it pay a dividend as long as over $5 billion is drawn on those same three lines.

The move to us is about debt extension, and we believe it does not create new funding for GM. The company drew about $16 billion in late March (see our March 24 note) to add onto about $15 billion-$16 billion of cash as of March 31, so we believe this April 2022 credit line is already maxed out or nearly maxed out, as are all of GM’s automotive credit lines. GM now has the $3.6 billion line expiring in April 2022, a $3 billion line expiring in January 2022 (though that line becomes a $2 billion line as of July 2020), and a $10.5 billion line expiring in April 2023. GM also has a $1.95 billion line exclusively allocated for GM Financial that expires in April 2021, but perhaps that line’s funds could be moved to the automotive business if needed. Excluding the line for GM Financial and adjusting for $1 billion of liquidity going away in July, we estimate GM currently has $300 million available on its credit lines.

We expect a GM liquidity update on May 6 when it reports first-quarter results, but all that matters now is getting plants reopen as soon as safely possible. We expect a gradual restart, focused on light truck models, to begin sometime in May or June.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

David Whiston does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.