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Highlights from Ford's presentation at the JPMorgan Auto Conference

  • Ford (F -1%) projects capital spending will be boosted by 25% by mid-decade to $7.5B as it works to meet increased global demand.
  • CFO Bob Shanks raises the possibility Ford will increase its dividend payout rate during the same time-frame.
  • In general, previous earnings guidance is reiterated.
  • In an update on its pension progress, the automaker notes it settled another $1.5B in obligations during Q2 under a voluntary lump sum program to reach $2.7B to date.
  • Webcast
Comments (5)
  • AdamDivy
    , contributor
    Comments (412) | Send Message
     
    Would love to see the div increased ASAP!
    14 Aug 2013, 01:35 PM Reply Like
  • kevn1111
    , contributor
    Comments (68) | Send Message
     
    He didnt say divi amount he said rate...so to me that is the divi/price. So as the stock increases the divi amount increases. Sounds like they may want to raise not just the amount, but the rate. Could all just be jargon and the meaning be amount. I would love to see a 3.5%-4% divi though and maintain within those parameters.
    14 Aug 2013, 02:56 PM Reply Like
  • Tdot
    , contributor
    Comments (3739) | Send Message
     
    The "dividend payout rate" may refer to percent of after tax profits, not percent of price, since price is a lot more arbitrary, and frankly price is not really a relevant metric in terms of financial performance on Ford's side.

     

    Anyway the current dividend payout is already about 28% of last year's profits ($1.41), about 25% of the trailing 4 quarters profits ($1.57), 26% of the profits currently projected for this year ($1.53), and 23% of the profits currently projected for next year ($1.75).

     

    Ideally the shareholder dividend should be roughly a quarter of the take, so the current 40 cents is "about right" for now. As Ford's earnings grow towards, say, $2 per share in mid decade, the dividend can grow from 40 cents to maybe 50 cents or so.

     

    Ford could also be entertaining the idea of increasing the payout percent from around 25% to maybe 30% or so, suggesting a 60 cent dividend in mid-decade, assuming Ford is producing at least $2 per share profits when Europe breaks even and Asia really starts to kick in some returns on the investment there.
    15 Aug 2013, 06:09 AM Reply Like
  • Tdot
    , contributor
    Comments (3739) | Send Message
     
    Here is what Shanks said:

     

    “In 2012, we resumed our dividend, then doubled the per share amount in the first quarter this year. Since dividends were reinstated, we will have returned $2 billion to shareholders based on dividends paid or declared so far this year,” he said.

     

    Shanks said that Ford continues to target a regular dividend that grows with earnings and is sustainable over an economic or business cycle.

     

    “We expect the One Ford plan to continue to deliver over time an improving investment grade balance sheet, a growing business with strong operating margins, and sustainable dividends as we invest our capital in opportunities that generate returns in excess of the cost of capital,” he said, summing up his presentation. “As we continue to do this, we expect to provide attractive total shareholder returns.”

     

    The key takeaway should be that Ford's dividends will be "regular" and "sustainable" (as in not fluctuating with business cycles, either up or down in the longer term), and generally proportional to earnings - both current performance and future expectations. Ford does not want to be forced to cancel or reduce the dividend again after increasing it, and needs to remain a little conservative in handling the free cash.

     

    Shareholders need to understand that Ford must continue to invest heavily in business opportunities that can grow profits, and not give away too much as dividends and end up with too little cash to grow the core business.
    15 Aug 2013, 07:51 AM Reply Like
  • AdamDivy
    , contributor
    Comments (412) | Send Message
     
    Thanks for the info all!
    15 Aug 2013, 09:31 AM Reply Like
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