Ford doubles dividend -- is it now an income stock?

The shares now appeal to a whole different group of investor. GM, meanwhile, tries to get back to investment grade.

By TheStreet Staff Jan 10, 2013 12:56PM

thestreet logoFord emblem at the Chicago Auto Show JEFF HAYNES AFP Getty ImagesBy Ted Reed

 

Ford (F) said Thursday it will double its dividend as the U.S. auto industry continues on its long march back to blue-chip investment status.

 

Ford's board declared a first-quarter dividend of 10 cents a share on outstanding Class B and common stock, doubling the nickel a share it paid in each quarter of 2012. The automaker said it plans "to grow its dividend, consistent with earnings and liquidity growth, to a level that is sustainable through all business cycles."

 

The move comes just nine months after Ford restored its dividend in March, after a period of more than five years in which it paid no dividend at all.

 

The dividend increase boosts Ford's yield to 3% from 1.5%, which makes the stock desirable "to a new investor class" of income managers, wrote Jefferies analyst Peter Nesvold in a note Thursday morning.

 

"Most income managers look for a 4% to 5% yield typically before initiating a new position," Nesvold wrote. "However, in some cases, such managers might accept a 3% yield if they believe there is sufficient share price appreciation. We think Ford now meets these criteria."

 

Nesvold said the increase "illustrates Ford's internal confidence in the amount of cash that will be required to execute its European restructuring plan." He has a "buy" rating and a $16 price target.

Ford shares, which closed Wednesday at $13.47, were up 2% in late morning trading, or 27 cents, to $13.75.

 

Through the first three quarters of 2012, Ford increased its liquidity position by $2 billion and generated 10 consecutive quarters of positive automotive operating-related cash flow. The first-quarter dividend is payable on March 1, 2013, to shareholders of record on Jan. 30, 2013.

 

On Wednesday, GM (GM) CEO Dan Akerson said the company hopes to regain its investment grade status this year, after eight years when its debt traded as junk. Akerson met with reporters in Detroit in advance of the Detroit Auto Show.

 

"Our goal is by the 2015 to '16 time frame to be single-A investment grade," said Akerson, according to The Detroit News."Ultimately we have to be profitable in everything we do."

 

Shares in the two publicly traded Detroit automakers showed gains in 2012, with Ford up 17% and GM rising 38%. Both companies benefited from continuing strong U.S. auto sales and from the outlook for continuing gains in 2013.

 

 

More from TheStreet.com

3Comments
Jan 10, 2013 7:01PM
avatar
And the government did not bail them out.  They were just better managed.  GO FORD!!!!
Jan 11, 2013 3:10AM
avatar

Casaer...The part you are really missing is Ford has doubled, tripled and much more for some...

 

The .10 per share is just a little frosting on the rising cake...

 

You are probably not invested in it.....??

Jan 10, 2013 11:37PM
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

125
125 rated 1
267
267 rated 2
455
455 rated 3
612
612 rated 4
682
682 rated 5
695
695 rated 6
632
632 rated 7
472
472 rated 8
279
279 rated 9
147
147 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
VZVERIZON COMMUNICATIONS9
TAT&T Inc9
CTLCENTURYLINK Inc8
EXCEXELON CORPORATION8
AAPLAPPLE Inc10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.