Ford dividend: It's back. But will it help?
It has been five long years for Ford shareholders including the Ford family. For the first time since the third quarter of 2006, Ford is paying out a quarterly dividend.
The company will pay common and class B shareholders 5 cents per share at the end of the first quarter. In announcing the dividend, Ford CFO Lewis Booth said "We'd like the dividend to be sustainable. As our results improve, we may raise it. But there's no further guidance right now."
That's fine, Ford shareholders will take a nickel a share and not complain.
The move was widely anticipated and while it will cost Ford just under $200 million, it's symbolic value may be even greater. Remember when Ford withdrew the dividend in 2006? At the time, Alan Mulally and the board made the prudent decision to suspend the dividend while the company borrowed heavily to begin a turn around. At the time, there were more than a few people in Detroit and at Ford who openly wondered why they should hold onto a stock that was languishing under $10 a share with no dividend.
I remember talking with Alan Mulally about the dividend back then and he put it in simple terms. "We need to fix our balance sheet. Once that happens, we will bring the dividend back," said Mulally. Given the billions Ford was losing at the time, more than a few people wrote off thinking about the dividend altogether.
So who benefits the most from the Ford dividend? The Class A common shareholders will split just over $186 million.
The Ford family, which owns the 70.8 million class B shares, will get $3.54 million. Chairman Bill Ford Jr. will receive a quarterly dividend check of just over $200,000. There will be some complaining about the Ford family getting that money and those complaints ring hollow with me. The Fords stood by the company when many said they should unload the business as it lost billions of dollars. Now they are getting paid and I don't have a problem with it.
But will the dividend make Ford shares more attractive? It will help, but only a little. Ford shares are down 35% this year in part because investors are worried about all the automakers with exposure to a European market where they are losing money...that's a story for another day. On this day, the focus in Dearborn is on the restoration of a dividend.
