Ford fighting with Wall Street over its cherished dividend

Bloomberg

Wall Street says Ford Motor Co. must cut its dividend. The automaker says that’s nonsense.
The debate erupting over Ford’s quarterly payout to shareholders — including the founding family that derives millions from the disbursements — is exposing a growing and contentious divide over what needs to be done to fix the ailing automaker.
Analysts at Morgan Stanley and Berenberg say Ford can no longer afford to pay the 15-cent dividend — the most generous among its automotive peers — as earnings evaporate overseas and the company initiates an $11 billion restructuring that it’s said will take as much as five years.
Ford Chief Financial Officer Bob Shanks responds that the carmaker has enough cash and income to cover the dividend, even in a downturn, in large part thanks to its healthy credit unit. “The regular dividend is not at risk, and all those commentaries coming after the quarterly call are all baseless,” Shanks said. “We’re very comfortable with our strategy on the dividend.”
The founding Ford family has a bit of skin in this game, of course. The dividend provides at least $42.5 million in annual income to owners of the Class B stock that only the progeny of Henry Ford can hold, which give them 40 percent voting control over the company.
The payout to the family is much higher when holdings of regular common stock are factored in. Executive Chairman Bill Ford, 61, and his cousin Edsel Ford II, 69, hold a total of nearly 7 million shares. As board members, only those two are required to disclose their common holdings.
When speaking on behalf of the family during the company’s annual meeting last year, Bill Ford told shareholders that “most of our net worth is tied up in the company.” At this year’s meeting in May, Bill Ford joked about the importance of the dividend to his family while reading a question from an investor.
“Why is the company so stingy with paying dividends?” Bill Ford read during the webcast meeting. He quipped: “Was that sent in by a member of the Ford family?”

Dividend History
Ford last reduced its dividend in July 2006 and then suspended it two months later, as truck and sport utility vehicle sales were collapsing amid rising gasoline prices.
The company resumed the dividend in 2012 in the wake of being the only Detroit automaker to make it through
the global recession without resorting to a government-backed bankruptcy.
At 6.3 percent, Ford’s dividend yield ranks as the fifth highest in the S&P 500 Index, according to Bloomberg data.