General Motors (NYSE:GM) Has Affirmed Its Dividend Of $0.09

General Motors Company's (NYSE:GM) investors are due to receive a payment of $0.09 per share on 14th of December. The dividend yield is 1.3% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for General Motors

General Motors' Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, General Motors' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 2.2% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 4.5%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of $1.20 in 2013 to the most recent total annual payment of $0.36. Dividend payments have fallen sharply, down 70% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. General Motors has impressed us by growing EPS at 56% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like General Motors' Dividend

Overall, we like to see the dividend staying consistent, and we think General Motors might even raise payments in the future. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for General Motors that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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