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After A Long Struggle, Ford Pays A Dividend Again

But Payout Less Than Expected, Leaving Funds To Fix Europe

Ford Motor Co signalled its return to health when it reinstated a dividend payment to shareholders.

The dividend was suspended in 2006 as it sought to clear the decks for action to fight the expected recession, and as it was running out of money thanks to racking up $9 billion in losses over the previous five years.

The new dividend was a smaller than expected five cents a share, but was welcomed by investors like Bank of America Merrill Lynch which sees a bright future for the company.

“There are numerous positives on the horizon for Ford, which still do not seem to be fully appreciated by the market. First, the U.S. demand cycle is just beginning to recover from the trough. Second, we estimate Ford will at least retain recent market share gains, as it maintains is solid consistent product launch schedule,” said Merrill Lynch analyst John Murphy.

There were other positives too

  • Mix and profitability may improve, augmented by increasingly efficient R&D spend through the One Ford strategy.
  • The consumer financing arm is healthy.
  • Sold earnings and cash flow should drive an improvement in the balance sheet, said Murphy.

Morgan Stanley was impressed too, and welcomed the fact that the smaller than expected dividend, which would cost about $760 million, would leave more than $400 million to help fix Europe.

“We expect the extra proceeds to be put to use building out emerging market capacity and restructuring Europe,” said Morgan Stanley in a report.

In the third quarter Ford Europe’s losses widened from $196 million to $306 million.

Neil Winton – December 15, 2011

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