Credit: Shutterstock photoGeneral Motors CompanyGM announced a comprehensive capital allocation strategy which reflects its strong and sustained operating performance and robust financial position. Per this strategy, the automaker intends to return its entire free cash flow to shareholders while maintaining the investment-grade balance sheet with a cash balance of $20 billion to boost long-term growth.
As part of this capital allocation plan, General Motors' board announced an initial share repurchase of $5 billion, expected to be completed before end-2016. In addition, General Motors announced, last month, that it will increase its quarterly dividend by 20% to 36 cents per share. The dividend payout is expected to be around $5 billion through the end of 2016.
From Jan 2016, General Motors will form the annual capital return plans which will be announced in the first quarter of every year.
General Motors is focused on enhancing its operating performance and capital investments. The company will continue its investment in innovative technologies and vehicles which should provide sustained growth while maximizing shareholders value.
General Motors will continue to invest in high-return businesses. The automaker expects to incur capital expenditure of $9 billion related to vehicle launches in 2015 and beyond. The company intends to achieve at least 20% return on invested capital (ROIC) through investments in vehicle and technology upgrades.
On an adjusted basis, General Motors expects earnings before interest and tax (EBIT) and EBIT margin to increase in 2015 from the preceding year. The company reaffirmed its financial targets and expects to achieve 10% adjusted EBIT margin from North America in 2016. The company also expects to record profits in Europe by 2016 and retain solid margins in China. General Motors also expects adjusted EBIT in the range of 9-10% by early next decade.
General Motors carries a Zacks Rank #3 (Hold).
Better-ranked auto stocks include Allison Transmission Holdings, Inc. ALSN , American Axle & Manufacturing Holdings Inc. AXL and Superior Industries International, Inc. SUP . All these stocks sport a Zacks Rank #1 (Strong Buy).
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
