4 Reasons General Motors Company Stock Is a Dividend-Only Pick

General Motors Company (NYSE:GM) stock has been, well, in the slow-lane this year. Note that the shares in GM stock are off about 7.5%. And yes, there are many issues to concern investors in General Motors stock.

Consider the following:

Tariff Concerns

President Donald Trump has recently enacted a 25% tariff on steel and a 10% tariff on aluminum. Granted, his policy has been watered down as there are exclusions for Canada and Mexico. Oh, and the Trump tariffs provide flexibility for other allies.

Of course, steel and aluminum are critical for autos. And even though GM relies heavily on domestic sources, there is likely to be some inflation with the commodities. What’s more, there are ongoing concerns about the renegotiation of NAFTA and perhaps other protectionist actions.

Keep in mind that China is an important market for GM. So if there is a trade war, the impact could be serious for General Motors stock.

Legal Concerns for GM

Back in 2014, GM recalled 2.6 million cars because of faulty ignition switches that turned off engines and air bags when there were crashes. Because of the bankruptcy of the “old GM,” there have been lots of legal complexities. However, it looks like GM could face even more exposure. According to a recent post in the Wall Street General, the company may be forced to transfer $1 billion in General Motors stock to handle the liabilities.

Sales Woes at GM

They have been lagging. In February, US car sales fell by 2.4%. But GM’s performance was even worse, with a drop of 7%. Yet the softness in demand should be no surprise. The past few years have seen strong gains – so there is likely saturation. Besides, consumers must deal with cost pressures, such as from the rise in interest rates.

Tom Taulli is the author of various books. They include Artificial Intelligence Basics and the Robotic Process Automation Handbook. His upcoming book is called Generative AI: How ChatGPT and other AI Tools Will Revolutionize Business.

Now this is not to imply that GM stock is somehow doomed. As seen with the latest earnings report, the company continues to remain highly profitable. For 2017, operating cash flows came to $6.6 billion, up by $1.9 billion on a year-over-year basis.

For the most part, CEO Mary Barra has done a good job managing the company. A key part of the strategy, of course, has been cost cutting and unloading various divisions.

But she has also been focused on the product line. There has been quite a bit of traction with crossovers – like the Chevrolet Traverse/Equinox, Buick Enclave and GMC Terrain – that sport juicy profit margins.

GM Stock and Autonomous Vehicles

GM has been aggressive with its investments in autonomous cars and other next-generation technologies. To this end, the company plans to shell out $1 billion on these efforts in 2018.

True, it’s nowhere near what others like Alphabet Inc (NASDAQ:GOOGL) and Tesla Inc (NASDAQ:TSLA) are likely to spend. But then again, GM does have some inherent advantages. The company has a global manufacturing and distribution system.

There are also a large number of well-known brands – backed up with massive advertising campaigns. And yes, the company has been showing progress with its electric vehicles.

As for GM’s investments, they have been strategic. The company owns 9% of Lyft and controls Cruise Automation, which is a leading player in autonomous technologies.

But it is also important to keep in mind that GM has a long history with building technologies, as seen with its OnStar platform.

Bottom Line 0n GM Stock

GM stock is fairly cheap, with the forward price to earnings multiple of 6X. The dividend is also at 4%. Although, on a relative basis, Ford Motor Company (NYSE:F) looks even more attractive. After all, the dividend yield is at 5.7%.

While GM should get a boost from its technology initiatives, this will still take a couple years. In the meantime, there are really few catalysts to bump up growth, especially since auto sales are projected to keep slowing down.

So for now, GM stock is probably an interesting dividend play – but it could be tough to see meaningful capital gains.

Tom Taulli is the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.