As you probably know, Ford (F) recently doubled its dividend to a quarterly $0.10/share. Today I'll try to find out if this was a good idea. To do so, I will be going through Ford s quarterly earnings reports for the 2007-2012 period.
Note: All graph's where made by me using Microsoft Excel.
North America: Revenue and operating margins are going up
As you can clearly see from the graph above, Ford lost some of its revenue in 2008 and 2009, but has since grown at an impressive rate. Pre-tax results, have continuously grown, thanks to a growing operating margin.
All in all, prospects for North America look very good. Let's take a look at Europe next.
Europe: Revenue going down, operating margin dropping like a brick
Ford's revenue in Europe has dropped from $36.3 billion in 2007 to $26.6 billion in 2012. Pre-tax results have taken a huge hit in 2012, going to a negative $1.7 billion.
The operating margin chart below says more than a thousand words:
After dropping in 2007 and 2008, the operating margin was stuck at around the 0%-point for a couple of years, before dropping to a negative 6.6% in 2012.
South America: Revenues keep growing, Operating margin trending downwards
The graph above shows the revenue and pre-tax results. It clearly shows that, while revenues have grown over the years, pre-tax results have slowly declined. This is much more visible when we look at the operating margin graph below:
Asia Pacific Africa: Great growth opportunities
Revenue for Ford in Asia and Africa has grown since 2009, climbing up at double digit rates. In 2012, they sold over 1 million cars in this region for the first time.
Operating margin has been low, as Ford has to invest to grow its market share. I expect earnings to catch up to the revenue growth in the next couple of years.
Dividend: Sustainable, and with nice growth possibilities.
Earnings per share have been positive since 2009, and Ford has started to save up a nice amount of cash, as the graph below clearly shows:
While Ford had negative net cash until 2009, they are now sitting on $10 billion, and have started to pay shareholders a nice dividend.
I believe the dividend could double or triple in the next 5 years, which would mean great returns for anyone getting in now. Here's why:
-Ford North America is bringing in enormous amounts of money, which will sustain the company as they try to cut costs in Europe.
-Ford South America is still profitable, even with operating margins having dropped in recent years.
-Ford Asia Pacific Africa's sales have been going up, and over the next years, this will become very profitable
What's your view on Ford? Please comment below!
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in F over the next 72 hours.