Ford dividend doubles in surprise on record profit margins

Ford Motor Co., the second-largest U.S. automaker, doubled its quarterly dividend to 10 cents a share after record profit margins boosted its cash.

The first-quarter dividend will be payable March 1 to shareholders of record on Jan. 30, the Dearborn, Michigan-based automaker said today in a statement. Ford, which resumed paying a dividend last year after a five-year hiatus, cited its strengthening business as the reason for increasing the payout.

Ford earned $6.47 billion before taxes in North America in 2012’s first nine months, more than it made in the region for all of 2011. North America had an operating profit margin of 11.2 percent during the period in an industry where a 5 percent margin is respectable, as part of Chief Executive Officer Alan Mulally’s product-development plan known as One Ford.

“Ford put a plan in place to fix the company, they leveraged up and put a mortgage on the place to get it done, and they’ve executed that,” Matthew Stover, a Boston-based analyst with Guggenheim Securities LLC, said by telephone. “Now, they’re returning some capital.”

Ford rose 3,1 percent to $13.89 at 10:22 a.m. New York time. The shares had gained 4 percent this year through yesterday after rising 20 percent last year.

Ford has recorded 14 consecutive quarters of net income as it has boosted margins through its One Ford global product development plan. Mulally, 67, is trying to boost profits by selling the same models globally, rather than different versions for various regions. The strategy aims to leverage Ford’s economies of scale to improve profit margins.

Tops Expectations

“When I heard the news driving into work this morning, I got excited,” said Gary Bradshaw, fund manager for Dallas-based Hodges Capital Management, who has about 150,000 Ford shares and now is ready to buy more. “As soon as I heard it, I thought, ‘Man, now is the time to buy Ford, the stock is acting great.’”

Bradshaw said he now regrets reducing his Ford holdings last year after the automaker said it would lose $3 billion in Europe in 2012 and 2013. European woes and the sluggish U.S. recovery had weighed on Ford shares for much of last year, Bradshaw said.

The amount and timing of the dividend increase surprised some analysts.

“This announcement is larger than we expected,” Joseph Spak, an analyst for RBC Capital Markets, wrote today in a note to investors. “Today’s announcement shows strong confidence in their outlook, balance sheet and liquidity. We expect Ford to continue to grow the dividend with earnings and liquidity.”

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