Cash Burn Puts GM Dividend in Jeopardy, Report Says
June 02, 2008
General Motors is among almost three dozen of the biggest U.S. companies with dividends in jeopardy because annual payouts exceed cash flow, Bloomberg News reported Monday.
GM, which holds its annual meeting Tuesday in Wilmington, Del., produced 33 cents a share in so-called free cash flow last year while maintaining a $1 dividend, Bloomberg said.
GM cut its annual payout in half to $1 a share in February 2006. Last year, free cash flow was $189 million, less than the $567 million needed to pay its dividend. On May 13, GM said it may have to borrow and reduce spending if the U.S. economy worsens. The company said last week that 19,000 workers accepted buyout packages and will leave as part of a cost-savings program. Analyst Himanshu Patel at JP Morgan Chase & Co. said in a May 5 report that GM's divided may be in jeopardy. GM declined to comment on the report.
"If earnings and cash flow don't match your dividend, it's not a sustainable thing," Phillip Davidson, who oversees $18 billion as chief investment officer for value equities at American Century Investments in Kansas City, Missouri, told the Bloomberg about the predicament of the 34 companies like GM, including The New York Times Co. and Motorola, with the dividend payment exceeding cash flow.
Posted by Michelle Krebs at 8:18 AM under Analysis , GM | Comments (0) | digg this | Seed Newsvine
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