Bloomberg News

Ford Ends 5-Year Dividend Drought by Declaring 5-Cent Payout

December 09, 2011

Dec. 8 (Bloomberg) -- Ford Motor Co., the second-largest U.S. automaker, today declared a 5-cent quarterly dividend, its first payout to shareholders since September 2006.

The move comes after Ford earned $1.65 billion in the three months ended in September, its 10th consecutive profitable quarter, and negotiated a new four-year contract with the United Auto Workers covering its 40,600 U.S. hourly workers. The dividend will be paid March 1 to shareholders of record on Jan. 31, the Dearborn, Michigan-based automaker said in a statement.

“The board believes it is important to share the benefits of our improved financial performance with our shareholders,” Executive Chairman Bill Ford said in the statement. “It is an important sign of our progress in building a profitably growing company and our confidence in the future.”

Chief Executive Officer Alan Mulally revived Ford by focusing on quality and fuel economy in new models such as the Fiesta subcompact and redesigned Explorer sport-utility vehicle. Ford earned $9.28 billion in the past two years after losing $30.1 billion from 2006 through 2008 as a collapse in SUV sales was followed by the worst recession since the Great Depression.

“A dividend is definitely a catalyst,” said Brian Johnson, a Chicago-based analyst at Barclays Capital who rates Ford “overweight.” “This is putting Ford back on the radar screen of portfolio managers.”

Recovering an investment-grade credit rating will also attract investors, Johnson said.

S&P, Moody’s

Standard & Poor’s raised Ford’s credit rating two levels to BB+, the highest non-investment grade, on Oct. 21, saying the new contract will not impede profitability or cash generation. Fitch Ratings upgraded Ford to BB+ from BB on Oct. 20, and assigned a positive outlook. Moody’s Investors Service raised Ford’s corporate rating to Ba1, one step below investment grade, on Oct. 27 and said the new UAW contract reinforces the automaker’s “strong position in North America.”

S&P and Moody’s assigned Ford a non-investment grade rating in 2005.

Ford had said it wouldn’t pay a dividend until it returned to investment-grade ratings. That position changed in October.

“Our shareholders have been very patient,” Booth, the finance chief, said Oct. 20 on a conference call about the labor agreement.

Concerns about Europe’s debt crisis and slow economic growth have weighed on the automaker’s shares, which have fallen 34 percent this year through yesterday. Ford gained 68 percent in 2010.

“I want the stock to double over the next two or three years,” said Gary Bradshaw, a fund manager at Hodges Capital Management in Dallas, which owns about 250,000 Ford shares. “That’s how we’ll make our money on Ford. The dividend is secondary.”

--Editors: Bill Koenig, John Lear

To contact the reporter on this story: Keith Naughton in Southfield, Michigan, at knaughton3@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net


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