After shelving its common-stock dividend more than five years ago, Ford Motor (NYSE:F) revealed plans on Thursday to reinstate a dividend early next year.
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The announcement highlights the financial turnaround for the Dearborn, Mich.-based auto maker, which has slashed its debt, generated solid cash flow and avoided following its peers into bankruptcy.
Ford said it will pay a 5-cents-a-share quarterly dividend on March 1 to shareholders of record of Class B and common stock on January 31.
“We have made tremendous progress in reducing debt and generating consistent positive earnings and cash flow," Bill Ford, Ford’s executive chairman, said in a statement. "The board believes it is important to share the benefits of our improved financial performance with our shareholders.”
After briefly being halted, the news sent shares of Ford bouncing off session lows of $9.84. They were up 0.5% at $11.10. Still, Ford’s shares have plunged by more than one-third so far this year.
According to Bloomberg News, Ford eliminated its common-stock dividend in September 2006 just as it borrowed $22 billion that eventually provided a financial cushion during the 2008 recession. That economic downturn led to the bankruptcies of General Motors (NYSE:GM) and Chrysler in 2009.
"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,” said Lewis Booth, Ford’s chief financial officer.