The doubling of Ford’s dividend occurred almost a year earlier than Jefferies Inc. expected, analyst Peter Nesvold wrote today in a research report. The New York-based analyst, who has a buy rating on Ford, increased his price target to $16 from $14.
Ford ended a five-year dividend drought when it declared a 5-cent payout in December 2011. The last time the company had a 10-cent dividend was June 2006, Jay Cooney, a company spokesman, said in an e-mail.
Bloomberg analysts predict that Ford’s quarterly dividend may increase to 12 cents a share in 2014. The Bloomberg dividend estimates are based on criteria including a company’s guidance, dividend history, regression analysis and put-call parity.
One Ford ‘Testament’
“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,” Chief Financial Officer Bob Shanks said in the statement.
Moody’s Investors Service raised its rating on Ford to investment grade in May, one month after Fitch Ratings. Standard & Poor’s ranks Ford’s debt BB+, the highest level of speculative grade, with a positive outlook, according to data compiled by Bloomberg.
The Ford family has 40 percent voting power through a special class of stock known as Class B. Executive Chairman Bill Ford, great-grandson of founder Henry Ford, holds 14.5 million Ford common shares and 4.23 million Class B shares, according to the company’s 2012 proxy statement. The family held 70.9 million Class B shares as of March 14.
“People will argue, particularly given what’s happened recently with tax rates if this is the smartest decision, but then they’ll also need to remember that there is a very significant family shareholder here that relies on these dividends for income,” said Stover, who has a neutral rating on Ford.
General Motors Co., the largest U.S. automaker, doesn’t pay a common dividend. Ford and Detroit-based GM are trading at their highest levels in more than 17 months.
A rising share price for GM would boost the U.S. Treasury Department, which pledged in December to sell its 500 million GM shares in the following 15 months.