Ford Motor Co. shares rose to their highest level in a year and a half Thursday after the automaker announced that it would double its dividend.
THE SPARK: Ford will increase its quarterly payment to investors to 10 cents. The first-quarter dividend will be paid March 1.
THE BIG PICTURE: Ford is increasing its dividend as the recovery in the U.S. auto market gathers steam.
The Dearborn, Mich., company halted its dividend in 2006 as it headed into serious financial problems. But it restarted the payout last March after a successful turnaround. The company has posted three annual profits. Analysts expect that 2012 will be another profitable year, despite sales declines in recession-struck Europe.
The last time Ford paid a 10-cent dividend was in June 2006. It paid a 5-cent dividend in September 2006.
THE ANALYSIS: Jefferies analyst Peter Nesvold said that the increase came a year earlier than he expected, suggesting to him that Ford is getting a better handle on how to manage its deteriorating European business.
The higher dividend may also lure more investors, Nesvold said.
SHARE ACTION: Shares increased 33 cents, or 2.5 percent, to $13.80 in afternoon trading. The stock peaked Thursday at $13.94, its highest level since July 2011.