Ford sets a special $1 billion dividend, but profit outlook disappoints

By David Shepardson

(Reuters) - Ford Motor Co (NYSE: F) on Tuesday declared a $1 billion supplemental cash dividend, but its outlook for 2016 profit failed to exceed Wall Street's estimates, sending its stock down in after-hours trading.

The No. 2 U.S. automaker said it expected record 2015 pre-tax profit, excluding special items, in the "upper half" of its outlook for $10 billion to $11 billion. That is above the average analyst forecast of $9.4 billion, according to Thomson Reuters I/B/E/S.

Profit for 2016 will be at least as high, excluding special items, said Ford. Analysts were expecting pre-tax profit of $11 billion for 2016, on average.

“Their guidance is in line or below what was expected," said Matthew Stover at Susquehanna Financial.

Ford shares dipped about 1 percent from Tuesday's close, to $12.55, in after-market trading.

Ford's chief financial officer, Bob Shanks, told investors at a conference in Detroit Tuesday evening the company expects higher costs this year as it invests in new model launches and technology-driven ventures to offer transportation as a service or develop autonomous vehicles. Shanks also cautioned that Ford's North American margins, forecast at 9.5 percent or better for 2016, may not have much room to improve in a competitive market.

"At some point margins don’t grow any further," Shanks said. The forecast margins for North America "are extremely strong margins for a volume manufacturer." Healthier profits from Europe and Asia offer an opportunity for overall profit growth, he added.

The $1 billion supplemental cash dividend, or 25 cents per share, is in addition to the first-quarter regular dividend of 15 cents per share, which is unchanged from the dividend paid in the fourth quarter of 2015.

Ford paid $2.5 billion in dividends last year, up 20 percent from 2014.

At an industry conference in Detroit on Tuesday, Mike Jackson, chief executive of AutoNation Inc (NYSE: AN), the largest U.S. auto dealer group, said the peak of the industry’s cycle has been reached and a plateau began in the fourth quarter of 2015. Last year, U.S. auto sales hit a record 17.4 million vehicles, nearly breaking a record set in 2000.

Last March, rival automaker General Motors Co (NYSE: GM) said it would buy back $5 billion worth of shares and distribute another $5 billion in dividends to shareholders by the end of 2016. GM is expected to offer a 2016 forecast Wednesday.

(Additional reporting by Bernie Woodall; Editing by Sandra Maler, Bill Rigby and Leslie Adler)

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