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Ford's Debt Payment Means Dividend May Return as Soon as 2012

July 1, 2010
2 min to read


Ford Motor Co., which caught up yesterday on preferred stock dividends it missed for 14 months, may resume payouts on the common stock as soon as 2012, according to data compiled by Bloomberg.


The automaker still needs to pay off more of its approximately $27 billion in debt before resuming the dividend, officials and analysts said. Still, quarterly dividends of 5 cents a share could proceed in 2012, a year ahead of earlier projections, according to Bloomberg estimates based on the data.

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Ford removed a key legal hurdle to the dividend by paying $255 million in deferred dividends on its Capital Trust II preferred stock, along with a $3.8 billion payment to a trust for union retirees. Now that those dividends are paid in full and restored, Ford is free to reinstate a dividend on its common shares and Class B shares owned by the Ford family. The size of the payments -- made ahead of schedule -- shows the carmaker is confident it can generate cash.


“If you have that kind of cash flow and you’re paying down debt, I could see a dividend maybe a year from now,” Bernie McGinn, president of McGinn Investment Management in Alexandria, Virginia. His firm owns 330,000 Ford common shares.


Ford eliminated its common-stock dividend on Sept. 15, 2006, when it was 5 cents a share. The company made its last payout on the Capital Trust II in January 2009 and missed payments starting in April of that year.


“Our priority is to continue to reduce debt and strengthen our balance sheet, and ultimately restore an investment-grade debt rating,” Mark Truby, a Ford spokesman, said in an e-mail. “As we make progress on these objectives, I’m sure our board will evaluate the stock dividend down the road.”

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