Ford Motor Company Takes Another Step to Return More Value to Shareholders

Ford Motor Company announced yesterday it would repurchase $1.8 billion of common stock.

May 11, 2014 at 9:05PM

Ford headquarters. Source: Ford Motor Company.

Ford Motor Company's (NYSE:F) stock price has been stagnant this year as short-term investors headed toward the door after 2014 was labeled a building block for a stronger business in 2015 and beyond. Ford's turnaround since the recession has been nothing short of impressive and will be discussed in business classes in the decades to come, and despite the stagnant stock price recently, the folks at the Blue Oval continue to return value to shareholders.

Ford has accomplished this mainly through its reinstated dividend, but yesterday, it made an additional move to return value to shareholders: share repurchases.

Share buyback
Ford recently reported that its automotive operating-related cash flow reached $1.2 billion in the first quarter with its automotive gross cash topping $25 billion. Ford's automotive gross cash also exceeds its automotive debt by nearly $10 billion, and its automotive liquidity improved to $36.6 billion.

As Ford continues to improve its cash generation, it has been able to take further actions in reducing its automotive debt, increasing its dividend, and now buying back shares.

Ford announced it will repurchase up to 116 million shares of Ford common stock, which is worth roughly $1.8 billion. Ford's share repurchases will offset the effect of potential conversions of the company's 4.25% senior convertible notes due Nov. 15, 2016 as well as share-based employee compensation granted this year. This move will reduce Ford's diluted shares by about 3% and will have a small effect on increasing earnings per share.

"These actions are consistent with our overall capital strategy to take anti-dilutive actions and position ourselves to further reduce Automotive debt," said Bob Shanks, executive vice president and CFO, in a press release. "The strength of our cash generation gives us confidence to take these actions to enhance shareholder returns..."

While Ford's announcement is clearly a positive one, it's not a large enough buyback to merit an increase in fair value estimates. That said, I believe this could set the stage for the company to announce larger buybacks in the future, as I believe Ford's stock remains undervalued, and its automotive liquidity is very strong.

In addition to its recent share repurchase announcement, Ford continues to grow its dividend, which also returns value to shareholders.

Graph by author. Source:

Ford's dividend pays out $0.125 per share quarterly for a total of $0.50 per share annually. At today's price, that's roughly a yield of 3.1%, which compares very favorably to Japanese rivals Toyota and Honda, which check in at around 2.2% and 1.2%, respectively. Ford's dividend yield trails only cross-town rival General Motors, but that's mainly because GM's stock has suffered a pullback in its stock price amid its massive recall debacle this year.

Foolish takeaway
Ford is tackling its most aggressive vehicle launch schedule in company history this year, which will set the company up for much stronger top-line revenue growth throughout the rest of this decade. Looking at Ford's bottom line, the automaker is expanding aggressively in the world's largest automotive market, China, and remains on track to reverse billions of losses in Europe next year.

Ford's dividend payout ratio is only about 30% of net income, which easily leaves room for increasing the dividend in the future. That's especially true as its operations become more profitable overseas. Ford's recent share buyback announcement could be just the beginning of management's ability to return more value to shareholders via an increasing stock price, dividend, and share buybacks.

Warren Buffett just bought nearly 9 million shares of this company
Imagine a company that rents a very specific and valuable piece of machinery for $41,000... per hour (that's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report details this company that already has over 50% market share. Just click HERE to discover more about this industry-leading stock... and join Buffett in his quest for a veritable landslide of profits!

Daniel Miller owns shares of Ford. The Motley Fool recommends Ford. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers