General Motors (GM) concluded 2025 on a high note, surpassing Wall Street's fourth-quarter earnings expectations and subsequently raising its net income and adjusted earnings forecasts for 2026. The company also announced an increase in its dividend and initiated a new $6 billion share repurchase program. This robust performance has seen GM's stock price more than double over the past three years, significantly outperforming its competitor Ford Motor Company, which saw a mere 1% gain, and even exceeding the S&P 500's 68% increase. Despite these impressive figures, many investors still lean towards Ford due to its more prominent dividend. However, a deeper look reveals why GM offers substantial value beyond just its dividend payouts.
Ford's commitment to its dividend strategy is noteworthy, consistently allocating 40% to 50% of its free cash flow to shareholders through dividends. In periods of robust cash flow, Ford has also provided additional supplemental payments, a practice that has benefited investors in recent years. The Ford family, retaining a special class of shares, holds significant voting rights and receives substantial dividend payments, ensuring that dividend-friendly decisions are likely to be supported within the company's governance structure.
While General Motors' current dividend yield stands at a modest 0.8%, falling below the S&P 500 average and significantly trailing Ford's yield, the true value for GM investors lies in its aggressive share buyback programs. Since 2023, GM has authorized a staggering $22 billion in share repurchases. These buybacks have substantially reduced the number of outstanding shares, thereby boosting the earnings potential for each remaining share. This strategy has directly contributed to the upward trajectory of GM's stock price.
For discerning investors, the concept of "Total Yield" provides a more comprehensive metric for comparing companies with differing approaches to returning capital to shareholders. This metric combines both dividend yield and buyback yield. While Ford's dividend yield of 4.5% might appear more attractive than GM's 0.8% on the surface, when factoring in buybacks, GM's total yield reaches an impressive 8.6%, significantly surpassing Ford's 5.6%. This demonstrates that GM is currently delivering greater overall value to its shareholders, despite Ford often receiving more attention for its dividend-centric approach.
General Motors' consistent strong performance, coupled with its strategic focus on share repurchases, positions it as a compelling investment opportunity within the automotive sector. The company's ability to navigate market challenges and continuously enhance shareholder value through various mechanisms underscores its strength. For investors seeking robust returns, considering GM's comprehensive value proposition, beyond just its dividend yield, is crucial. This integrated approach to capital return highlights GM's commitment to its investors and its strong standing in a competitive industry.