Ford Boosts Dividend 25% Citing Improved Balance Sheet

Ford Motor Co. (F), citing its improved balance sheet, boosted its quarterly dividend for common shares and the stock held by its founding family by 25 percent, exceeding an estimate by Bloomberg analysts.

The quarterly distribution will rise to 12.5 cents, up from 10 cents and topping the 12-cent estimate by Bloomberg analysts. The dividend is payable March 3 to shareholders of record at the close on Jan. 31, the Dearborn, Michigan-based company said in a statement.

After a five-year drought when the company suspended its payout, Ford resumed paying a distribution in 2012 at 5 cents and doubled it to 10 cents a year ago. The increased dividend will pay $35.4 million annually to members of the company’s founding family for their 70.9 million Class B shares that give them 40 percent voting power.

“This is how they get paid, so that is a big motivation,” Kevin Tynan, an analyst at Bloomberg Industries, said of the Ford family. “You can do it under the guise of returning value to shareholders, but the family is a big driver.”

Ford rose 1.9 percent to $15.84 at the close in New York. The shares advanced 19 percent last year as the Standard & Poor’s 500 Index gained 30 percent.

Executive Chairman Bill Ford, 56, held 4.44 million Class B shares as of Feb. 1, according to the company’s annual proxy filing last year. The higher dividend would boost the annual payout for those holdings to $2.22 million. Including the 14.6 million common shares that he held as of Feb. 1, the chairman would stand to collect almost $9.54 million per year.

Ford Family

Edsel Ford, the 65-year-old director who also is a great-grandson of the company’s founder, held 3.16 million common shares and 5.24 million Class B shares as of Feb. 1. The 12.5-cent dividend would boost the total annual payout for those holdings to $4.2 million.

The dividend increase reflects Ford’s strong performance in 2013, including a $3 billion improvement in its liquidity position through the third quarter, the company said in its statement. The second-largest U.S. automaker last month said pretax profit rose to about $8.5 billion in 2013 as it logged its best sales in its home country in six years and reported record deliveries in China.

Based on 3.87 billion shares outstanding, the new dividend will cost Ford $1.94 billion annually.

“This increase in the dividend provides our shareholders with a regular, growing dividend that we believe is sustainable over an economic or business cycle,” Chief Financial Officer Bob Shanks said in the statement.

GM Dividend

General Motors Co. (GM), the largest U.S. automaker, is in a better position to consider beginning a dividend this year, Chief Executive Officer Dan Akerson said last month. The U.S. Treasury sold its final shares of the Detroit-based company in December.

Ford avoided the bankruptcies that the predecessors of GM and Chrysler Group LLC filed for because it borrowed $23.4 billion in late 2006, less than four months after Chief Executive Officer Alan Mulally arrived from Boeing Co. The automaker put up all major assets, including its blue oval logo, as collateral. It recovered control of those assets in May 2012 after Moody’s Investors Service followed Fitch Ratings in upgrading Ford’s debt out of speculative grade.

Mulally, who had been a candidate to succeed retiring Microsoft Corp. CEO Steve Ballmer, this week told Associated Press that he wanted to end speculation about his leaving for the world’s largest software maker. Mulally, 68, owned 21.78 million common shares as of Feb. 1, which would yield almost $10.9 million annually with the new dividend.

More than one-third of Ford shareholders voted in favor of a proposal to strip the founding family of its 40 percent voting control of the company and move to one vote per share during its annual meeting in May. While that was the most support the measure has received since it was first proposed in 2005, it was rejected almost 2-to-1.

To contact the reporter on this story: Craig Trudell in Southfield, Michigan at ctrudell1@bloomberg.net

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.