Ford Motor Co. said Thursday it will resume paying a dividend in March, more than five years after it halted payments because of financial problems.
The company's board approved a quarterly dividend of 5 cents per share. It will be paid on March 1 to shareholders of record as of Jan. 31.
"We have made tremendous progress in reducing debt and generating consistent positive earnings and cash flow," Executive Chairman Bill Ford said in a statement. "The board believes it is important to share the benefits of our improved financial performance with our shareholders."
Ford stopped paying a dividend in September 2006, when it was deeply in debt. The company lost $12.7 billion that year.
Since then Ford has shed brands like Volvo and Mercury, closed factories, offered buyouts to thousands of employees and earned praise and new customers for products like the Ford Explorer SUV and Ford Fiesta subcompact. Ford reported its tenth straight profitable quarter in the third quarter of this year, and it earned $6.6 billion in 2010.
Ford previously planned to wait to resume its dividend until it achieved investment-grade status. Ford's credit sank to so-called "junk" status in 2005 as it racked up billions in debt.
But Chief Financial Officer Lewis Booth said Ford changed its mind over the summer and decided it didn't need to wait for the ratings agencies to act.
Booth said Ford's priority was making sure it was investing in new products and overseas growth. The company then put off action on the dividend until it completed negotiations with the United Auto Workers union on a new four-year contract. Ford workers approved a new contract in October that raises Ford's labor costs by less than 1 percent per year.
Standard and Poor's, Fitch Ratings and Moody's Investors Service all raised Ford's credit ratings to one notch below investment grade after the contract was approved. S&P reiterated its "buy" rating on Ford stock Thursday, saying Ford's dividend payout will amount to 11 percent of its 2012 net income.
"This should allow for continued operational investment and debt reduction," S&P said.
Ford has around 4 billion outstanding shares, so Ford's payout will be around $200 million each quarter, Booth said.
Brian Johnson, an auto analyst with Barclay's Capital, said in a note to investors that the dividend level was at the low end of his expectations, but he thinks Ford is leaving room for an increase in the dividend. That increase could come as early as next year, he said.
Booth wouldn't say whether the company intends to increase its dividend after the first quarter. He said Ford wants to keep the level sustainable so it won't have to cut the dividend if the economy sours. Ford paid a 10-cent quarterly dividend from 2002 through the first half of 2006, for example, but cut that to 5 cents per share for one quarter and then dropped it entirely as its financial troubles mounted.
Ford's main domestic rival, General Motors Co., still is not paying a dividend after its 2009 bankruptcy and restructuring. GM suspended its dividend in July 2008.
The New York Stock Exchange halted trading of Ford shares temporarily just before the noon dividend announcement. Trading resumed about 10 minutes later.
Ford stock fell 33 cents, or nearly 3 percent, to close at $10.75 in a market that was rattled by European economic woes.
Auto Writer Tom Krisher contributed to this report.