CORRECTED-UPDATE 1-Ford doubles dividend to seven-year high

Thu Jan 10, 2013 10:17am EST

(Corrects paragraph 4 to say Ford last paid a 10-cent dividend in June 2006, not May, and restored dividends in March 2012, not December 2011)

Jan 10 (Reuters) - Ford Motor Co doubled its quarterly dividend to 10 cents per share, its highest in seven years, on the back of strong sales in North America and a healthy balance sheet.

The first-quarter payout, which will cost No. 2 U.S. automaker about $370 million, comes despite recent market share losses and weakness in its European business.

"Ford's plan is to grow its dividend, consistent with earnings and liquidity growth, to a level that is sustainable through all business cycles," the company said in a statement.

Ford last paid a 10-cent dividend in June 2006. Shortly after that, the company reduced and later suspended its dividend as it struggled to avoid bankruptcy. It restored dividends in March 2012.

"We had thought that a dividend increase was likely but this announcement is larger than we expected," RBC Capital Markets analyst Joseph Spak said.

"Today's announcement shows strong confidence in their outlook, balance sheet and liquidity."

Ford shares jumped 3 percent in premarket trade to $13.88.

The company said it increased its liquidity position by $2 billion through the first three quarters of 2012.

Earlier this month, Ford said its U.S. sales crossed 2 million cars in 2012 and reported its strongest December sales since 2006. It beat Wall Street profit forecast when it last reported results in October.

The automaker, however, has acknowledged losing market share as it struggles to keep up with consumer demand. Losses from Europe are expected to be at least $3 billion over the next two years, and the company has announced plant closures and job cuts to save costs.

Ford's market share fell to 15.5 percent in 2012 from 16.8 percent in 2011.

The dividend is payable on March 1 to shareholders of record on Jan. 30. (Reporting by A. Ananthalakshmi in Bangalore; Editing by Sreejiraj Eluvangal and Saumyadeb Chakrabarty)