Are Dividends and Buybacks Now Central to GM's Capital Strategy?

U.S. legacy automaker General Motors GM has been generating strong free cash flow. In recent years, the company has become more focused on returning that cash to shareholders. Buybacks and dividends are now a central part of GM’s capital allocation strategy.

In 2025, GM generated $10.6 billion in adjusted automotive free cash flow. Over the past five years, GM says its average annual free cash flow has structurally improved to around $10 billion from $3 billion. This gives the company more flexibility in how it allocates capital.

Buybacks have become the primary tool. Since late 2023, GM has returned $23 billion to shareholders through share repurchases. Over that period, the company has reduced its share count by nearly 35%, retiring more than 465 million shares. In 2025 alone, GM repurchased $6 billion worth of stock, including $2.5 billion in the fourth quarter. Following these actions, GM’s board approved a new $6 billion buyback authorization, signaling that repurchases will remain an ongoing part of the strategy.

Dividends are also moving higher. GM announced a 20% increase in its quarterly dividend, raising it to 18 cents per share. While the dividend yield may not be quite attractive, the increase reflects management’s confidence in future cash flows.

For General Motors, increasing shareholders' value via dividends and buybacks is the cornerstone of its capital strategy. And that’s instilling investor confidence. Unlike in the past, when automakers often prioritized expansion, capacity additions, or long-term bets at the expense of returns, GM is now striking a healthier balance between reinvesting in the business and rewarding shareholders. As long as GM maintains margin discipline and avoids chasing uneconomic growth, shareholders stand to benefit.

The company’s balance sheet supports this approach. GM ended 2025 with $21.7 billion in cash and continues to reduce debt. It also guided $9-11 billion in free cash flow for 2026, even after factoring in tariffs, EV restructuring and higher software investment.

Recent Dividend Hikes by Auto Companies

Oshkosh OSK has also been leaning into shareholder returns, reinforcing investor confidence. In January 2025, Oshkosh raised its quarterly dividend by 10.9%, increasing it from 51 cents to 57 cents per share. This marked the 11th straight year of double-digit dividend growth for OSK. Beyond dividends, Oshkosh repurchased $119 million of stock in the fourth quarter of 2025. Strong performance in Vocational and Transport segments, supported by a sizable backlog, margin expansion, and the NGDV ramp-up, gives OSK solid earnings visibility while supporting continued capital returns.

Autoliv ALV is also strengthening its capital return profile as its balance sheet improves. As of Dec. 31, 2025, Autoliv’s long-term debt declined to $1.57 billion, down from $1.77 billion at the end of the third quarter, with a manageable debt-to-capital ratio of 40%. ALV increased its fourth-quarter dividend by 24% to 87 cents per share, signaling confidence in cash flows. In addition, Autoliv has authorized up to $2.5 billion in share repurchases under its 2029 buyback program, reinforcing ALV’s commitment to shareholder-friendly capital allocation.

Zacks Rundown on GM

Shares of General Motors have risen 80% over the past year, handily outperforming the industry.

From a valuation perspective, GM appears undervalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 0.97, lower than the industry’s 3.92. 

See how General Motors’ earnings estimates have been revised over the last 90 days.

GM stock carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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