* Dividend increase is larger, earlier than expected
* Ford's Q1 payout to common shareholders to exceed $370 mln
* Automaker's shares rise more than 2.5 percent
By A. Ananthalakshmi and Deepa Seetharaman
Jan 10 Ford Motor Co doubled its quarterly
dividend on Thursday to 10 cents per share, its highest in seven
years, betting it can boost earnings even as it tries to staunch
losses in Europe and deal with flagging market share in the
The automaker's move, which could attract yield-hungry
investors, reflects Ford's belief that it has the firepower to
overhaul its European unit. Ford expects to lose at least $3
billion in Europe over the next two years.
"The doubling of the dividend illustrates Ford's internal
confidence in the amount of cash that will be required to
execute its European restructuring plan," said Jefferies analyst
Peter Nesvold in a research note.
Ford's shares rose 37 cents, or 2.8 percent to $13.84 in
afternoon trading on the New York Stock Exchange.
The first-quarter payout to common shareholders will cost
the No. 2 U.S. automaker more than $370 million. The Ford
family, which holds a separate group of shares that hold more
voting power, will receive $7 million a quarter.
Ford last paid a 10-cent dividend in June 2006. Shortly
after that, the company reduced and later suspended its
quarterly payout as it scrambled to avoid bankruptcy during the
height of the recession.
"Ford's plan is to grow its dividend, consistent with
earnings and liquidity growth, to a level that is sustainable
through all business cycles," Ford said on Thursday.
The larger-than-expected increase was announced earlier than
analysts predicted. Nesvold, who expected the move to occur in
late 2013, boosted his price target on the stock by $2 to $16.
Ford shares, which gained 20 percent in 2012, jumped as much
as 3.5 percent to $13.94 on the New York Stock Exchange. Shares
of rival General Motors rose 42 percent last year.
At the Detroit auto show next week, Ford will unveil a
compact crossover under its luxury brand, Lincoln, as well as an
early look of its upcoming F-150 pickup truck, the top-selling
vehicle in the United States.
Ford is struggling to keep up with consumer demand in the
United States, where its market share fell to 15.5 percent in
2012 from 16.8 percent in 2011.
Automotive consulting firm Polk forecasts Ford's U.S. market
share will fall further, to 15 percent this year and 14.5
percent in 2014.
Analysts said the dividend increase bodes well for
fourth-quarter earnings, due this month. Ford's U.S. sales
crossed 2 million cars last year. In the third quarter, Ford
posted record 12-percent margins in North America.
The increased dividend is payable on March 1 to shareholders
of record on Jan. 30. RBC Capital Markets analyst Joseph Spak
predicted that Ford would continually grow the dividend as the
company's earnings and liquidity improves.