General Motors: New Leadership, New Dividend?

There’s been a lot of talk about General Motors (GM), maybe too much talk. This stock is not a rebel stock. It’s just going through lots of changes, especially when compared to competitors like Ford (F) and Toyota (TM). That’s what happens when you name a new CEO and the government sells its last shares of your stock.

Associated Press

JPMorgan’s Ryan Brinkman and team say the choice of Mary Barra to head General Motors puts the focus back where it belongs:

Barra is an engineer by training who most recently led GM's global product development effort. We expect her appointment to place product front and center – where it belongs…One must go back 1992 to find an example of the last time automotive engineers were at the helm of General Motors (Robert Stempel, and Llyod Reuss…).

Morgan Stanley’s Adam Jonas and team call the shakeup to management a boon for the company–and a pleasant surprise:

Recasting the mgmt team so soon is an unexpected bonus to start the 2nd stage of GM's reincarnation. GM's come a long way, but its full potential is not yet unlocked, in our view. The sun is still shining on US autos, but right out of the gate the new team faces a growing list of cyclical and competitive storm clouds outside of its control, particularly in the US. Tens of billions of dollars of value are up for grabs. The battle has already begun.

Susquehanna’s Christopher Jacobson looks at what the options market is saying about General Motors’ potential dividend now that the government is out of the way:

…if investors expect an announcement in the near-term and expect 4 dividends to be paid out over 2014, the Jan15 options appear to price in roughly $0.13 ($0.52 / 4) per dividend. To get a sense of expectations further out, we can apply the same exercise to the Jan16 options, although we note that the markets out this far are much wider, leaving much more room for changes in the dividend policy. Nonetheless, when we back out the Jan2016 dividend stream, we arrive at roughly $1.36 in cumulative dividends. Removing the $0.52 priced in to 2014, this would imply roughly $0.84 in dividends over 2015, or roughly $0.21 per dividend. In summary, if we were to assume 4 dividends in 2014 and 4 in 2015, the options would appear to price in a quarterly dividend around ~$0.13 in 2014 increasing to around ~$0.21 in 2015, although we again note that our numbers would change with changes in assumed interest rate, timing of the dividends, etc.

Shares of General Motors have dropped 0.5% to $40.19 today at 3:32 p.m., while Ford has fallen 1.1% to $16.34 and Toyota has declined 1% to $120.49.