DETROIT (Bloomberg) -- General Motors Co. may pay a dividend as early as 2012 after funding its pension, Brian Johnson, an analyst at Barclays Capital, said in a new report distributed today.
GM may begin paying the dividend after contributing $5.5 billion or more in cash to its U.S. pension in each of the next two years, Johnson wrote today in a note. The ability to start payouts in 2012 would require "exceptionally strong" returns on pension assets that bring the program to full funding, he said.
GM CFO Chris Liddell has called for the automaker to reduce its debt and fund pension obligations so the automaker can maintain spending on vehicle development through downturns.
GM paid down $11 billion of debt last year and made $6 billion in cash and stock contributions to the U.S. pension.
"They have made it clear that they want to bring the pension plan even first" before paying a dividend, said Johnson.
GM doesn't comment on individual analysts' research, said James Cain, a spokesman. But he referred to GM CEO Dan Akerson's statement during a Feb. 24 conference call that GM will take "meaningful steps" in 2011 to fully fund the U.S. pension plan.
Barclays is assuming 8.5 percent returns on pension assets this year and through 2013, making a dividend unlikely before 2013, Johnson said. The returns, combined with cash contributions to the pension plan, would allow GM to pay a dividend of 50 cents in 2013 and 75 cents in 2014, he said.
The dividend could come by mid-2012 if returns are 11.5 percent this year and next year, or if there is a "sharp increase" in long-term interest rates, Johnson wrote.
The U.S. pension was underfunded by about $11.5 billion as of Dec. 31, Liddell said last month.
GM earned $6.17 billion in 2010, the largest annual profit since its predecessor earned $6.7 billion in 1997.
General Motors Corp., which filed for bankruptcy in 2009, suspended its 25-cent dividend in July 2008. The automaker had $82 billion in losses from 2005 to 2008.