Ford to split stock, increase dividend

April 15, 1994|By New York Times News Service

DETROIT -- Casting a strong vote of confidence in the automobile industry's strengthening recovery, the Ford Motor Co. plans to increase its dividend for the first time since 1989 and to split its stock two-for-one.

At a meeting yesterday, Ford's directors signed off on an increase in the quarterly cash dividend of 12.5 percent, to 45 cents a share, from 40 cents, or 22.5 cents once the stock splits. In 1991, Ford, the nation's No. 2 automaker, cut the dividend to its current level of 40 cents a quarter, from 75 cents.

Ford announced a laundry list of other changes yesterday: the sale of the company's troubled savings and loan, First Nationwide Bank, for $1.1 billion; the purchase of the 26 percent share of the Hertz Corp. that Ford does not already own, giving the automaker sole ownership of the world's largest car rental company, and the reversal of its previous decision to kill off the Aerostar, Ford's aging rear-wheel-drive mini-van.

In heavy trading on the New York Stock Exchange, Ford stock closed at $58.50 a share, up $1.375.

Analysts took the dividend increase as a sign that Ford, generally conservative when it comes to its balance sheet and sales projections, is convinced of the recovery's momentum.

"I would guess that this dividend increase, if nothing else, suggests that dealer orders show we're in a boom," said Ronald A. Glantz, an auto industry analyst with Dean Witter in San Francisco.

The board would not have had the confidence to raise the dividend if sales in Europe, where Ford has been losing money, had not also perked up in the first quarter, said Jack Kirnan, auto analyst with Salomon Bros.

Sales improved for the quarter, compared with year-ago levels, in France, Germany, Spain and Britain, Mr. Kirnan said.

Wendy Beale Needham, an auto industry analyst for Donaldson, Lufkin & Jenrette, said Ford's increase was likely to be only the first in a series. "It's going to remind investors that these [U.S. auto] companies are going to start throwing off a lot of cash," she said.

Between the third quarter of 1983 and the first quarter of 1989, Ms. Needham said, Ford increased its dividend almost every other quarter.

The second-quarter cash dividends would be paid on June 1, to stockholders of record on May 2. At the annual meeting scheduled for May 12, Ford will seek shareholder approval for an increase in shares to accommodate the split, which would take the form of a 100 percent stock dividend, which would maintain the par value of the common stock.

If approved, the new shares would be distributed on July 5 to stockholders of record on June 6.

Ford also released its proxy statement, which showed that its new chairman, Alexander J. Trotman, was paid a $1 million bonus on top of his $716,667 salary, compared with no bonus and a $385,000 salary in 1992.

Harold A. Poling, who retired as chairman at the end of 1993, was paid $1.4 million in salary, $196,449 in other compensation and a $1.1 million bonus. He also received restricted stock worth $923,755.

After weighing several bids, Ford sold First Nationwide to First Madison Bank, a subsidiary of MacAndrews & Forbes Holdings, a New York-based holding company.

Ford bought the savings bank in 1985 for $496 million, hoping it would supply profits when auto sales were weak. But Ford found itself putting money into the subsidiary as the real estate market slumped in the 1980s.

Ford will take an after-tax charge of $440 million to account for unrecovered good will, and also to hedge against future losses. After the sale, Ford will still retain about $1.2 billion of assets in the bank holding company. Over the next three years Ford also may be compelled to buy back up to $500 million more of assets.

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