Stock Trading

Published: Thursday, 8 Dec 2011 | 3:37 PM ET
By: Phil LeBeau
CNBC Correspondent
http://www.cnbc.com/id/45602456

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 dollars, 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 all together.

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.

Ford CEO Alan Mulally To Seeking Alpha: We May Raise Dividend

Having only recently reinstated its dividend, Ford (F) could increase its payout to shareholders in the next year or two, CEO Alan Mulally told Seeking Alpha in an interview.

“That’s something that we’ll definitely consider based on the economic situation,…but clearly where we are in the growth cycle worldwide will be a primary consideration,” Mulally said. “It’s just another very important use of our cash.”

After a five-year hiatus, Ford said in December that it would pay a quarterly dividend of five cents a share. In the interview, Mulally said that the automaker could even repurchase stock.

“That’s always a consideration. Right now, we don’t have anything to announce about that, but we continue to look at the best way to manage our cash,” Mulally said. In addition to dividends, that includes de-risking Ford’s pension plan, and its heavy investment in its manufacturing and its vehicles.

Mulally’s aim is that those vehicles will be “best-in-class,” so he and the company’s senior management compare its autos with rival products on a daily basis.

“I drive the competitors’ vehicles every night, as does the entire leadership team at the Ford Motor Company,” he said. “Isn’t that fun?”

That team includes CFO Lewis Booth, who, according to reports last month, will retire in the first half. However, when asked about Booth’s possible departure, Mulally said there is “no new news to report on any of our team members at this time.” His own retirement has been the subject of speculation as well, although Mulally wouldn’t be drawn on his future either.

Ford’s CEO is seen as one of the company’s most important assets and is widely credited for its revival. In 2006, the year he joined, the firm made a net loss of $12.6B; last week, it reported a 2011 net profit of $20.2B, and said that pretax operating profit rose 6% to $8.8B while revenue increased 13% to $136.3B. It’s a turnaround that the company’s dealers have benefited from too.

“Their throughput is up, their profits are up, and the latest data from the dealers says that their franchises now are the most valuable they have ever been in the history of Ford,” Mulally said.

During the discussion, Mulally also spoke about the important factors in Ford’s turnaround and profitability, why the company is increasing its capital expenditure despite the uncertainty in the world economy, its debt, and its goals for the future.

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