Ford is shining a little brighter in investors' eyes.
Ford Motor Co. will take another critical step in its recovery by doubling its shareholder dividend, the maker today announced. Stockholders of record on January 30, 2013 will receive a 10-cent payout.
The move comes as the maker prepares to announce strong earnings for the final quarter of 2012 – and as its profit margin climbs to an all-time record level. Ford officials are clearly hoping to give a much-needed boost to the company’s stock price, which only recently began gaining momentum after more than a year in the doldrums.
The move also reflects growing optimism among analysts and ratings agencies, several of which recently bumped Ford debt up to investment grade after a decade in junk bond territory.
“Our ability to double our dividend in one year is a testament to our One Ford plan, which has enabled us to maintain a solid balance sheet, while at the same time growing our business to provide our shareholders with more return on their investments,” said Bob Shanks, chief financial officer, Ford Motor Company.
The only one of the Detroit Big Three automakers to avoid bankruptcy and a federal bailout in 2009, Ford narrowly survived the industry’s worst depression in decades by mortgaging its assets and drastically reining in spending. That included the dividend that the maker eliminated in 2006, just as auto sales started to plunge.
The maker restored a modest five-cent divided in December 2011, a move that generated strong enthusiasm, at the time, among both investors and ratings agencies. It was part of a strategy announced by CEO Alan Mulally to boost demand for Ford stock and help restore the maker’s investment grade rating – something the former Boeing executive listed among his top priorities.
Today’s doubling of the Ford dividend comes as the maker’s future begins to look more upbeat, especially in its core market. The company earned $6.47 billion before taxes in North America during the first nine months of 2012, more than for all of the prior year. Meanwhile, North American operations delivered an 11.2% profit margin, more than double what most analysts would consider respectable.
The strong performance at home is one key reason why Ford late last year promoted Mark Fields to become its new Chief Operating Officer. Fields was one of the architects of the plans that helped Ford get through the recent recession and had been serving as Presidents of the Americas for the carmaker.
The dime dividend still lags well behind Ford’s traditional payout, though it is the only one of the Detroit makers now paying any dividend at all. Nonetheless, it reflects the fact that the maker is still being cautious with cash.
Ford’s fortunes may have sharply improved but the company still has its problems, most notably in Europe, where it continues to lose money in a market that is expected to see sales tumble this year to their lowest level in nearly two decades.