General Motors (NYSE:GM) Will Pay A Larger Dividend Than Last Year At $0.12

The board of General Motors Company (NYSE:GM) has announced that it will be paying its dividend of $0.12 on the 14th of March, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 1.2%.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that General Motors' stock price has increased by 31% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for General Motors

General Motors' Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. 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.

The next year is set to see EPS grow by 21.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 3.3% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. 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. A company that decreases its dividend over time generally isn't what we are looking for.

General Motors Could Grow Its Dividend

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. General Motors has seen EPS rising for the last five years, at 8.9% per annum. General Motors definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like General Motors' Dividend

Overall, a dividend increase is always good, and we think that General Motors is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for General Motors that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.