General Motors (GM 1.79%) capped off 2025 in style, essentially firing on all cylinders by beating fourth quarter bottom-line earnings estimates from Wall Street, raising its 2026 forecasts for net income and adjusted earnings, increasing its dividend, and initiating a new $6 billion share buyback.
Over the past three years, GM's stock has more than doubled to a 113% rise, which leaves crosstown rival Ford Motor Company's (F 0.58%) 1% gain, and the broader S&P 500's 68% gain, in the dust. Despite all of this, many investors prefer to own shares of Ford for its dividend -- but let's dig into this, and see why GM is much more than just its dividend.
Image source: General Motors.
More to the equation
To be fair, Ford should be acknowledged for its valuable dividend. The company consistently returns 40% to 50% of its free cash flow to investors in the form of its dividend. When cash flow is stronger, the company will dish out an extra supplemental payment -- which it has done in recent years.
Making things even better for investors is that the Ford family still owns a special class of shares which, in addition to special voting rights, gives the family a hefty dividend payment and ensures the family is likely to back dividend supportive decisions.
While General Motors' dividend yield remains a paltry 0.8%, which is lower than the S&P 500's average dividend yield, and far behind Ford's, the automaker is much more valuable than investors realize because of its share buybacks.
Since 2023, GM has announced a staggering $22 billion in share buybacks that has drastically reduced its shares outstanding and boosted the earnings potential of the remaining shares. Its stock price has responded by driving higher.
Looking at total yield
For investors, there's a handy metric that includes both the company's dividend yield, as well as its buyback yield, into "Total Yield." It's extremely valuable in comparing companies such as Ford and GM, when both take opposite routes to returning value to shareholders.
When only considering the dividend yield, Ford's 4.5% is much more valuable than GM's 0.8% forward yield. However, when buybacks are included in the equation, GM's total yield reaches 8.6% compared to Ford's 5.6%.
NYSE: GM
Key Data Points
The truth is that General Motors is currently returning more bang for your buck than its competitor Ford, even if the latter tends to get more recognition due to dividend preference among some investors.
General Motors has been firing on all cylinders despite tariff headwinds. Now that investors realize the company returning significant value to shareholders, it's only one more reason to start a small position in what is arguably the best automotive stock out there.
