Ford returns to dividends

The payout isn't much, but it's the first from the automaker since 2006.

By Benzinga Dec 8, 2011 5:08PM

Image: Money (© Creatas/PictureQuest)By Jay Wong, Benzinga Staff Writer

Ford (F) said Thursday it has reinstated a quarterly dividend on its stock, and plans to pay out 5 cents per share on a quarterly basis.

The dividend will be the first from the company since 2006, when it faced significant financial difficulties and was forced to take large private loans to keep itself afloat. The decision paid off, as the company's perception seems to be better than competitors General Motors (GM) and Chrysler -- two companies that needed taxpayer loans to prevent outright collapse.

Ford shares fell 3% Thursday afternoon to $10.75.

Ford saw a significant decline in its business operations in the early 2000s, as the company bloated its balance sheet by acquiring brands such as Volvo, Jaguar, Land Rover, Aston Martin, and a stake in Mazda. The company also suffered from quality reviews of some cars, as reliability declined across the board and its smaller vehicles lacked the features of Japanese brands Toyota (TM) and Honda (HMC).

Ford underwent a dramatic transformation as the recession hit, unloading excess brands and reengineering most of its cars. The result four years later is striking. Ford now has incredibly competitive small cars, such as the Fiesta and Focus, at a time when Toyota has suffered massive recalls and Honda has failed to bring a competitive new Civic to the market.

Ford has also led the way in the technology field, partnering with Microsoft (MSFT) to bring features such as Sync and MyTouch to vehicles, giving them a degree of wireless connectivity that no competitor can approach. (Microsoft owns and publishes Top Stocks, an MSN Money site).

The Wall Street Journal reported that Ford has begun a search for a new CEO, with the plan that Alan Mulally would retire in two years. While Mulally has denied the rumors, it is inevitable that he will eventually retire, given his age. With his success at turning around Ford's product line and tremendous foresight at avoiding bankruptcy, investors are going to pay a great deal of attention to who will be picked to lead Ford next.

The Journal cited the possibility that Mulally could be replaced by John Krafcik, the American face of Hyundai's turnaround. Krafcik has accomplished many of the same objectives as Mulally, helping a brand with very little respect engineer some truly great vehicles, including the luxurious Genesis and Equus models. Curiously enough, Krafcik worked on Ford's product development team until 2004, right around the time when Ford's fortunes hit rock bottom.

Ford is an interesting stock. The new dividend shows that the company has come a long way over the past five years and now has a much healthier balance sheet. While the stock has fallen significantly over the past few months, Ford is looking for stronger auto sales in the coming years. If Ford can continue its run of building good cars, look for revenue numbers to see significant growth in the near future.

More from Benzinga: 
Dec 9, 2011 9:32AM
Ford is on the move.  Ten years from now Ford and VW will own the global market. 
Dec 9, 2011 12:25PM
FIrst of all, this is not a dividend play its a growth play. The dividend is just a start, now it has to grow and it will. What did yhou expect, 5% out of the gate? Once they tackle the debt, they can justify better returns, but for now, two shares a year on 100 shares is not a bad start.l
Dec 9, 2011 12:33PM

More like GM (#1) Toyota (#2) VW (#3) and Hyundai (#4) are in Fords way and that wont change other than Toyota and Hyundai flip flopping. Ford has a ways to go to even get close to being #3


Forget Hyundai at your own peril.

Dec 8, 2011 7:23PM
I wish the company well and I suppose they had to start somewhere, but the paltry yield won't anything to encourage a stock purchase. 
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