Ford Motors reinstates dividends

The Blue Oval starts paying dividends – again.

Ford Motor said it will reinstate its dividend for the first time in more than five years. At current prices, the new $0.20 annual dividend represents about a 1.8% yield. In a statement, Ford CFO Lewis Booth said the dividend, which will be payable in March, "will be sustainable through economic cycles." This marks another step in CEO Alan Mulally's plan to restore the auto maker to elite status among American manufacturers.

Initially, Ford said it would reinstate the dividend after the company achieved an investment-grade credit rating, however over the past few months executives have begun hinting that the dividend could come sooner. Ford "Pinto-ed" its dividend in September 2006 as its fortunes were turning down. The cancellation coincided with the hiring of Mulally, who at nearly the same time signed off on borrowing $23.5 billion to pay for a restructuring plan and to cushion the auto maker through an economic trough. Mulally is credited with steering the automaker back from the brink of bankruptcy. Ford was the only U.S. automaker not to take a federal bailout in 2009 and is now considered the strongest of the three Detroit automakers.

In October, Ford posted its tenth straight quarterly profit. The company has earned $6.6 billion in net income in the year to Sept. 30. And while Ford may not have achieved investment grade credit yet, it was moved up to one step below investment grade this fall after the United Auto Workers union approved a new four-year contract that increased the company's labor costs less than 1%. Commenting on the dividend, Ford Chairman Bill Ford said in a statement, "The board believes it is important to share the benefits of our improved financial performance with our shareholders."

Ford Motor (F : NYSE : US$10.75), Net Change: -0.33, % Change: -3.00%, Volume: 77,010,085

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx

About the Author

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

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