Ford (NYSE: F) has an extraordinary dividend yield of 7.9%. If its earnings continue downward and the price of its cars is jacked up by $6,000 to $8,000, it may need to cut the dividend to save its financial health. However, even the Dividend King Altria can’t match that yield today.
Key Points
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Ford Has A Tremendous Dividend
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That Dividend Could Stay In Place
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Wall Street has turned its back on Ford’s prospects. Goldman Sachs recently lowered its rating on the stock: “We downgrade Ford to Neutral from Buy to better reflect a more difficult cyclical dynamic including competition internationally, weaker consumer demand, and what we expect will be higher costs from tariffs.”
Ford’s first-quarter revenue collapsed from $42.8 billion to $40.7 billion compared to the previous year. Earnings tumbled from $.33 per share to $0.12, but the yield remains.
EBIT from the electric vehicle (EV) segment was a loss of $849 million, compared to $1.33 billion in the year-ago period. Ford’s EV plans continue to plague it. However, the yield is still there,
Ford’s shares will be down about 20% in the past year. The S&P 500 is up 10% for the same period. The yield is still there.
Chief Financial Officer Sherry House commented, “Our results in the first quarter show that the Ford+ [turnaround] plan is working. We are transforming this company into a higher growth, margin, capital efficiency, and durable business.” Many investors did not believe her.
Of the 26 analysts who follow Ford, 17 rate it as a “Hold,” and four rate it as “Underperform” or “Sell.” Most of these analysts worry about EV sales and that a small percentage of its sales are overseas. In particular, this has become and will be a problem in China, the world’s largest car and EV market, as local companies gather market share from Western manufacturers. That yield is still in place.
Ford has already warned that there is a significant risk if Chinese EVs enter the U.S. market. Today, tariffs are blocking that move. After visiting China and looking at its EVs, Jim Farley told board member John Thornton, “John, this is an existential threat.” However, Ford has not cut its dividend, which would cut its yield.
Ford has terrible labor union problems. Its deal with the UAW is expected to cost $8.8 billion between this year and 2028. At one point, during the labor negotiations, Farley said that the costs of the labor deal “were unsustainable and would put Ford at risk of bankruptcy.”
If Ford is publicly traded, its yield should be in place…or higher.
The post I’ve Never Seen A Dividend Yield Like This Before appeared first on 24/7 Wall St..
