Shares of Ford are up 2% in premarket trading after the company released news that it would be hiking its quarterly dividend rate by 20%. The quarterly dividend now stands at $0.15 per share, up from its prior rate of $0.125 per share, giving investors $0.60 per share annually. The 20% upgrade in dividend rate now gives Ford a yield of 4%. The company also announced that the ex-dividend date will be on January 28, 2015, with the record date on January 30, 2015, and dividend payout date of March 2, 2015.
Ford capitalizing on low oil price period
Ford continues to be well positioned and able to capitalize on the period of low oil prices. While low oil for an extended period of time could be damaging to the economy, airlines, transportation companies, auto manufacturers, etc are experiencing very bullish business environment. Even more smart is the fact that despite cheaper gas prices, Ford still continues to focus on its fuel efficient lineup such as the C Max Energi/Hybrid, Fiesta, Focus Electric, Fusion Energi/Hybrid and even its vast popular F-150 pickup line is getting up to 29-30 MPG on highway. Not to mention, Ford is enjoying the return of the “pony wars” with Chevrolet and Dodge, as “American Muscle” cars such as the Mustang, are making a huge comeback.
According to Trefis.com, Ford shares are estimated to rally from its current share price of $15.39 to $17.52. The breakdown of Ford’s earning sources show that truck/pickup sales in North America account for the largest source of their gross profits at $11.89 billion, or 37.1%. Next, international gross profit make up $9.57 billion or 29.9%, then its financing division bringing in $4.66 billion, or 14.5%. In the latter half, we see North American car sales come in at number four with $4.42 billion or 13.8%, then its Lincoln division with $877 million or 2.7%, followed by “other”, which is mostly made up of interest income, at $638 million or 2%.
Factors that might eat into Ford’s earnings
However, the company does have some aspects that eat into earnings. Adjusted selling and general automotive administration eats up -29.8% or -$9.57 billion, followed by depreciation and amortization costs of -$7.43 billion or -23.2%, research and development costs of -$6.47 billion or -20.2% and GAAP taxes of -$2.52 billion or -7.9%.
Overall, Ford continues to churn out decent profits and continues to remain competitive in the US and globally, as the focus continues to shun big, gas guzzling SUVs in favor of more compact and fuel efficient options. Ford was the only US automaker to not take Federal cash injections during the 2008 recession and their continued resilience and good management will allow the company to continue to thrive for many more years to come.