General Motors Co. may start paying a dividend as early as 2012 after contributing $5.5 billion or more in cash to its U.S. pension in each of the next two years, according to Brian Johnson, an analyst at Barclays Capital. Johnson wrote in a note that GM should have "exceptionally strong" returns on pension assets that bring the program to full funding.
GM CFO Chris Liddell wants the automaker to diminish its debt and fund pension obligations in order to maintain spending on vehicle development through downturns.
Last year, GM paid down $11 billion of debt and made $6 billion in cash and stock contributions to the U.S. pension, according to Autonews.
Johnson said that it has been made clear that GM wants to bring the pension plan even first before paying a dividend. However, GM spokesman James Cain said that the company won’t comment on individual analysts' research.
However, Cain cited a statement made by GM CEO Dan Akerson on a Feb. 24 conference call that GM will take "meaningful steps" in 2011 to fully fund the U.S. pension plan.
Johnson said that Barclays is assuming 8.5% returns on pension assets this year and through 2013. It means that a dividend is unlikely before 2013. He added that the returns, combined with cash contributions to the pension plan, will enable GM to pay a dividend of 50 cents in 2013 and 75 cents in 2014.