Automotive icon Ford Motor Company (NYSE:F) doubles its dividend.
Last week, Ford Motor Company (NYSE: F.US) doubled its dividend. Which, for a company that a few years back had been virtually written-off, isn't bad.
But Ford didn't go bankrupt during the recession, and didn't take a government bailout. Instead, it sold loss-making and non-core operations, abandoned the dividend, and worked hard on improving its balance sheet.
And last March, it resumed paying dividends after a gap of over five years, declaring a dividend of five cents, which it last week doubled to 10 cents. The last time it paid a quarterly dividend of 10 cents was in June 2006, before the credit crunch and the recession that ensued.
Ford's share price rose 2.7% on the day of the announcement, and today stands at close to a 52-week high. And -- get this -- the company is once again hiring.
In short, Ford looks to me like a turnround stock that's turned the corner.
Buy America
But Ford, it's fair to say, isn't a share that many British investors will ever have considered buying -- despite the fact that buying the shares of international companies is now easier, and cheaper, than ever.
Indeed, America's stock markets could well be considered a 'must buy' for serious long-term investors, making up as they do a whopping 52% of the MSCI World Index. The UK, by comparison, makes up just 9%.
Yet for all of this, few of us seeking exposure to America's markets get further than buying an American index tracker -- such as HSBC's low-cost HSBC S&P 500 ETF, or Vanguard's Vanguard S&P 500 ETF.
Doing the deal
The facts: look closely, and for most investors, trading through most 'big name' brokers, buying American shares is no more complicated than buying British shares.
Granted, the commission is a little higher, and there are foreign exchange costs to take into account, but these aren't excessive. My broker, for instance, charges just £11.95 commission -- and don't forget that with foreign shares, there's no stamp duty to pay.
That said, there's a little more form-filling involved. America's Internal Revenue Service charges a 30% Withholding Tax on dividends, for instance, and overseas investors -- that's you -- need to fill in a W-8BEN form once a year to get a reduced tax rate.
The good news? Every broker is familiar with these forms, and filling it in is very straightforward. Putting it another way, compared to when I first bought American shares through an American broker in the 1990s, today's dealing arrangements couldn't be simpler.
So is Ford a buy?
Clearly, there's still work to do on the balance sheet: debt is still high, and the easy cuts have been made. Europe's meltdown isn't helping, either, with sales in Europe down 27% in December, and losses of $1.5 billion being mooted.
But the contrast to the dark days of 2008 is stark, and with three years of returning profits under its belt, and rising earnings, Ford seems undeniably on the road to recovery.
| | Year ending 31 Dec 2011 | Year ending 31 Dec 2010 | Year ending 31 Dec 2009 | Year ending 31 Dec 2008 |
|---|
| Revenues | $136.3bn | $129.0bn | $118.3bn | $146.3bn |
| Pre-tax profit | $20.2bn | $6.6bn | $3.0bn | -$14.7bn |
| Earnings per share | $4.94 | $1.66 | $0.86 | -$6.46 |
| Dividend per share | $0.00 | $0.00 | $0.00 | $0.00 |
And as the global recovery continues, so will Ford's: vehicle manufacture remains a business with high fixed costs, where sales above the breakeven point have a disproportionate effect on profits. For proof, look no further than Jaguar Land Rover, sold by Ford to Tata Motors in 2008 for £1.1bn -- and which is now throwing off profits of £1.5bn a year. That's right: sold for just over £1bn, it's now making that in profit -- each year.
Changing hands today at $14.03, Ford's shares are rated on an attractive historic price-to-earnings (P/E) ratio of just over 3, and offer a historic yield of 2.8%. And while investors might not be tempted to buy at a 52-week high, Ford shares could well become an attractive 'buy' if events in the weeks ahead throw up short-term weakness in its share price.
Follow the money
One investor who certainly buys on weakness is Warren Buffett, whose Berkshire Hathaway investment vehicle has delivered returns of over 20% per annum since 1965, and turned Buffett himself into the world's third-wealthiest person.
As it happens, Buffett recently took advantage of weak results and a dip in the share price to top-up his holding in one particular FTSE 100 share -- an unusual move for an investor who rarely ventures outside the United States. As a result, he now owns over 5% of this company, which he first began buying back in 2006.
Its name? Simply download this free special report from The Motley Fool -- "The One UK Share Warren Buffett Loves" -- to find out. Inside, you'll discover just why Buffett has invested over £1 billion in this business, and why you could consider taking a stake as well.
With the share price sharply up in Buffett's most-recent purchase price, the share is still rated below the P/E of the FTSE 100 as a whole, and also offers a market-beating prospective yield of 4.2%. As I say, the report is free, and can be in your inbox in seconds. Click here to download it.
> Malcolm does not have an interest in any of the shares named.
