(Bloomberg News) 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.
Ford slipped 0.9 percent to $10.98 at 12:48 p.m. New York time. The shares tumbled 34 percent this year through yesterday.
The payout will cost Ford about $200 million a quarter, Chief Financial Officer Lewis Booth said in a conference call today.
Bloomberg analysts predicted in July 2010 that a 5-cent quarterly dividend would resume as soon as 2012. The Bloomberg dividend estimates are based on seven criteria, including a company's guidance, dividend history, regression analysis and put-call parity. The dividend may increase to 10 cents quarterly in a year, the analysts estimate.
"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.
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."