It hasn’t been that long ago since Ford reinstated its dividend, and Thursday brought the most recent increase, the second in two years. The automaker announced today that it will pay a first-quarter 2014 dividend of 12.5 cents per share, up 25% from the 2013 quarterly dividend of 10 cents per share. Though Ford’s Valuentum Dividend Cushion score indicates the pace of the advance is steep (and much higher than we would have expected), we like that management continues to put shareholders’ interests first. We think investors should expect a long-term dividend growth rate in the low-single-digits given the inherent cyclicality of the auto business. Ford will now yield in excess of 3.1% based on Thursday’s closing price. We plan to update the dividend report on Ford with the new information soon.
In other news, after months of unnecessary speculation that dominated headlines, reports indicate that turnaround expert Ford CEO Alan Mulally isn’t leaving Ford for Microsoft (MSFT), the latter looking for a replacement for Steve Ballmer. We didn’t think Mulally’s transition to Microsoft made any sense, unlike Mulally’s move to Ford from CEO of Boeing (BA) Commercial Airplanes, where the similarities in precision manufacturing were evident. We’re viewing Mulally’s decision to stay as a net positive for both companies. Mulally can make a much bigger impact at Ford and may have even been a distraction heading up the software giant. The list of candidates to take the head job at Microsoft includes server/cloud chief Satya Nadella, COO Kevin Turner, ex-Nokia CEO Stephen Elop, Facebook (FB) COO Sheryl Sandberg, and ex-Skype CEO Tony Bates. According to reports, Elop is the frontrunner.
Valuentum’s Take
Though Ford’s earnings outlook for 2014 was muted due to expected investments across its product portfolio, the company continues to please investors who will not only receive an increased dividend payout but also will keep their beloved CEO. Ford remains a holding in the portfolio of the Best Ideas Newsletter. Microsoft remains one of our top dividend growth ideas (see Microsoft ). Our best ideas are always included in the actively-managed portfolios.