I grew up in Detroit, and I remember the bad times in the auto industry. The Wall Street Journal reported yesterday, that investors will probably sell the stock if GM reduced their dividend. Why would this information be considered negative, and what is is the Wall Street Journal’s reason for making this assumption?

In the past, when GM and Ford reduced their dividends, investors looked at this as being a positive, and the stocks went up. I don’t think that current GM shareholders own the stock because of the dividend. Given the current market environment, owning the stock as an income source would not be very wise.

On the other hand, owning GM shares in anticipation of a dividend reduction would make sense, since the financial hardship that GM is currently experience is the burning of cash.

If GM cuts its dividend in half, the stock would still yield 4.7%, and save the company $550 million a year. When you get a company to stop bleeding cash, this has got to be viewed as a positive, not a negative like the Wall Street Journal would like you to believe.