It seems Ford‘s financial health is improving after an announcement that they will reinstate a cash dividend on their stocks at 5 cents a share.
Ford originally abandoned the dividend in 2006 as part of an effort to preserve cash after posting a total of $9 billion in losses the previous five years. They hadn’t planned to make such a move until their credit rating climbed back to investment status, but the board felt differently in light of the company’s success.
“We have made tremendous progress in reducing debt and generating consistent positive earnings and cash flow,” Bill Ford, executive chairman of Ford, said in a statement. “The board believes it is important to share the benefits of our improved financial performance with our shareholders.”
The $9 billion Ford lost leading up to the recession paled in comparison to the $30.1 billion they lost between 2006 and 2008, but it looks like the number crunchers feel good about the last 10 quarters where they posted consistant profits. As it stands, the dividend is payable on March 1, 2012, to Class B and common shareholders of record on Jan. 31, 2012.
S&P and Moody’s both downgraded Ford’s credit rating in 2005, before the bulk of their losses took place. Though neither returned Ford to the rating originally aligned with reinstating the cash dividend, they bumped the automaker up to just below investment grade. The upgrade came because of improved finances, but also after a renewed agreement with the United Auto Workers.
Lewis Booth, Ford’s CFO expects the company’s strong financial growth to support the dividend nonetheless.
“We have demonstrated our capability to finance our plans and we are confident that we can begin to pay a dividend that will be sustainable through economic cycles,” Booth said in a statement.
S&P said today that the move to reinstate the dividend will not affect Ford’s credit rating because it is less than the $2 billion they expect Ford to generate in automotive operating cash flow before the dividends are paid out.
Despite that, they also said that global industry prospects are weakening, pointing to economic uncertainty in Europe and a softening market in Brazil.
While it isn’t clear how much of an effect that will have on Ford, a blow to international sales may be a concern for the company on some level considering their growing international success with cars like the Fiesta.
[Source: Automotive News]