General Motors (NYSE:GM) Has Announced A Dividend Of $0.12

General Motors Company (NYSE:GM) will pay a dividend of $0.12 on the 20th of June. Although the dividend is now higher, the yield is only 1.1%, which is below the industry average.

See our latest analysis for General Motors

General Motors' Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, General Motors' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 14.8% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 3.5% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of $1.20 in 2014 to the most recent total annual payment of $0.48. Doing the maths, this is a decline of about 8.8% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

General Motors Could Grow Its Dividend

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. It's encouraging to see that General Motors has been growing its earnings per share at 7.9% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for General Motors (of which 2 shouldn't be ignored!) you should know about. Is General Motors not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.