A 2-for-1 split of General Motors Corp. common stock is partly designed to attract new investors, but auto industry analysts disagree whether the move will be effective.
"I wouldn't bet the ranch on it," said analyst David Healy of Drexel Burnham Lambert Inc. in New York.Charles Brady, an analyst with Oppenheimer & Co. in New York who has been bullish on GM stock, said he thinks the nation's largest automaker will attract new interest as a result of the split, which will halve the price by doubling the number of shares and make them more affordable.
On Monday, after the New York Stock Exchange closed, GM's board of directors approved a 20 percent dividend increase for the corporation's common stock, driving it to $1.50 a share. The board then approved the stock split, effective March 31.
GM's common stock jumped $4.371/2 a share to $93.871/2 in consolidated New York Stock Exchange trading on Tuesday. The nearly 5 percent increase helped catalyze a blue-chip rally that pushed the Dow Jones industrial average up 26 points.
The dividend announcement was anticipated on Wall Street. The split wasn't.
"I was expecting they would do it, especially since Ford did it," automobile analyst Kathleen Heaney of Nikko Securities Co. International Inc. said of GM's dividend announcement.
On Jan. 12, Ford Motor Co. announced a 25 percent increase in its dividend, moving it to 75 cents a share, but did not split its stock.