Ford reinstates quarterly dividend
Ford Motor Co. has reinstated its quarterly dividend after cutting the payment more than five years ago as it prepared to navigate a turbulent economy.
Ford will pay 5 cents a share to holders of Class B and common stock as of Jan. 31, 2012. The payment will be made March 1.
“We have made tremendous progress in reducing debt and generating consistent positive earnings and cash flow,” said Executive Chairman Bill Ford. “The board believes it is important to share the benefits of our improved financial performance with our shareholders.”
He said reinstating a quarterly dividend reflected the confidence Ford’s board of directors has in the automaker’s financial prospects. It has posted 10 consecutive profitable quarters.
“This is a positive sign not only for Ford, but for the entire automotive industry, which is recovering after a painful setback from bankruptcies and recalls,” said Scott Painter, chief executive of auto information company TrueCar.com.
“Ford has had an impressive run, improving its market share more than a full percentage point since 2009,” Painter said. “But Ford needs to remember that building products consumers will buy is the catalyst to a profitable and healthy automaker.”
Ford shares fell 33 cents to $10.75.
The automaker mortgaged most of its assets to borrow $23.5 billion in 2006. It used the funds to restructure the business so that it could weather the economic downturn and eventually return to a growth mode. In the process, Ford sold its Land Rover, Jaguar and Volvo brands and shut its Mercury division.
The strategy enabled the company to avoid the bankruptcies and federal bailouts that saved General Motors Co. and Chrysler Group. It also gave the automaker breathing room to focus on developing global vehicle platforms and components that would achieve economies of scale and support its core Ford brand. The company is working to rebuild the Lincoln nameplate.
The automaker has whittled away at the debt, slicing it to $12.7 billion by the end of the third quarter from $26.4 billion at the end of the same period a year earlier.
In October, ratings company Standard & Poor’s raised Ford’s corporate credit rating to BB+ from BB-. That put the company just one notch below an investment-grade rating, which is an important measure of corporate health and would reduce the automaker’s borrowing expenses.
Standard & Poor’s said Thursday that reinstatement of the dividend would equate to about $800 million in expenses for the automaker and would not affect the ratings or outlook for the company. That’s far less than the minimum $2 billion that S&P believes Ford will generate in annual automotive operating cash flow.
“Still, we note that prospects are growing for weaker industry sales in Europe and slower growth in other large markets such as Brazil, and that this could dampen cash flow prospects for operations outside North America,” the credit rating service said.
