DETROIT (AP/WWJ) – Ford Motor is going to resume paying a dividend on its stock, something the company hasn’t done in five years.
The company’s board of directors approved a quarterly dividend of 5 cents per share. It will be paid on March 1 to shareholders of record as of Jan. 31.
“We have made tremendous progress in reducing debt and generating consistent positive earnings and cash flow,” Executive Chairman Bill Ford said in a statement. “The board believes it is important to share the benefits of our improved financial performance with our shareholders.”
Ford stopped paying a dividend in September 2006, when it was deeply in debt. The company lost $12.7 billion that year. Last year, Ford earned $6.6 billion, and is on a pace to earn even more this year. Ford has posted ten consecutive quarterly profits.
“There’s no question the reinstatement of the dividend shows health,” says Jeff Schuster, vice president of forecasting at the industry consulting firm LMC Automotive. “A lot of improvements have been made from a financial standpoint.”
In the five years since Ford last posted a dividend the company has shed brands like Volvo and Mercury, closed factories, offered buyouts to thousands of employees and earned praise for new products like the Ford Explorer SUV and Ford Fiesta subcompact.
Schuster says success in the auto industry depends upon having products that people will want to buy at close to sticker price.
“It certainly couldn’t have been done without the restructuring of the cost side, as well as launching new products, and bringing out the right products for the market.”
Ford is expected to show an all new version of it’s popular mid size Fusion at January’s auto show, as well as the first all new product in its attempt to revive the Lincoln brand.
Company executives say Ford is now on the road to continued success.
“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,” Chief Financial Officer Lewis Booth said in a statement.
Ford spokesman Todd Nissen said the New York Stock Exchange halted trading of Ford shares temporarily just before the noon announcement. Trading resumed about 10 minutes later.
The Associated Press and WWJ AutoBeat Reporter Jeff Gilbert contributed to this story.