Dividend & Replacement Cycle, Discounting Ford's Poor Earnings (F, GM)

Cars and Drivers

Published: January 27, 2012 12:53 pm

Last Updated: April 27, 2020 8:18 pm

Ford Motor Company (NYSE: F) is getting clocked today after earnings. Some of the news should have been anticipated that Thai floods affected its supply chain in Asia because the company already telegraphed that. After taking a look at the start of the dividend and the trends in America and Asia, today may be a gift for the investors who are patient and who have wanted to own Ford.

As we noted this morning, “The company said that fourth quarter pre-tax operating profit was $1.1 billion, or 20 cents per share, a decrease of $189 million from fourth quarter 2010. Ford has posted a pre-tax operating profit for 10 consecutive quarters. Revenue for the period was $34.6 billion up $2.1 from the year before’s quarter.”

Asia seems like a spot where Ford should not be weak on the surface, but again that was explained a in recent weeks (when CNBC accidentally called for a loss at Ford rather than a loss in operations in much of Asia due to the ongoing Thai flood issues).

Our question is simple. Can the dividend save Ford? Ford was originally expected to reinstate its dividend at some point this year or even in 2013. Unlike General Motors Co. (NYSE: GM), Ford is not under government restriction and it does not owe any bailout funds back to Uncle Sam.

New investors entering today will get a dividend yield of 1.5% now that shares are down 3.5% at $12.30. Shares are still up handily in 2012 after closing at $10.76 on December 30.

The next boost is the coming replacement cycle here in the United States. Maybe this is not as large of a growth market as Asia and Latin America, but the drastic age of the U.S. car fleet owned by Joe Public is the oldest it has been in our lives. People can keep pouring a few hundred dollars here and a few hundred dollars there every few months to keep a clunker from clunking out, but eventually it is just cheaper to buy a new a car.

As long as the economy doesn’t fall apart rapidly, Ford’s dividend, the recovery after the Thai flooding, and the U.S. replacement cycle should all help Ford shareholders.

JON C. OGG

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