Ford on Thursday doubled its quarterly dividend to 10 cents a share, a move that will boost the annual payout to the Ford family to more than $28 million.
The first-quarter dividend, which will cost the company about $380 million, will be payable March 1, the company said. Ford, which resumed paying a dividend last year after a five-year hiatus, cited its strengthening business 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 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,” said Matthew Stover, a Boston-based analyst with Guggenheim Securities LLC. “Now, they’re returning some capital.”
Ford shares rose 20 percent in 2012.
The Ford family has 40 percent voting power through a special class of stock known as Class B. The increased dividend will pay out $28.3 million annually to the 70.9 million Class B shares outstanding.
“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.
Executive Chairman Bill Ford, 55, 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. Edsel Ford, 64, also a great-grandson of the founder, holds 3.06 million common shares and 5.24 million Class B shares.
A 10-cent dividend will boost Bill Ford’s annual payout to $7.49 million per year and raise Edsel Ford’s to $3.32 million.
Ford has recorded 14 consecutive quarters of net income as it has boosted margins. 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.
The amount and timing of the dividend increase surprised some analysts. It will cost the automaker $1.5 billion annually.
“This announcement is larger than we expected,” Joseph Spak, an analyst for RBC Capital Markets, wrote 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.”
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 email.
Bloomberg analysts predict that Ford’s quarterly dividend may increase to 12 cents a share in 2014.