Should You Buy Ford Motor Company (NYSE:F) For Its Upcoming Dividend?

4 weeks ago

1 3 minutes read

Ford Motor Company (NYSE:F) stock is about to trade ex-dividend in 2 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company’s books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company’s books on the record date. Therefore, if you purchase Ford Motor’s shares on or after the 18th of February, you won’t be eligible to receive the dividend, when it is paid on the 3rd of March.

The company’s next dividend payment will be US$0.30 per share, on the back of last year when the company paid a total of US$0.75 to shareholders. Last year’s total dividend payments show that Ford Motor has a trailing yield of 7.9% on the current share price of US$9.48. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! So we need to investigate whether Ford Motor can afford its dividend, and if the dividend could grow.

View our latest analysis for Ford Motor

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That’s why it’s good to see Ford Motor paying out a modest 41% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 36% of its free cash flow in the past year.

It’s encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don’t drop precipitously.

Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.

NYSE:F Historic Dividend February 15th 2025

Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That’s why it’s comforting to see Ford Motor’s earnings have been skyrocketing, up 163% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Ford Motor has increased its dividend at approximately 4.1% a year on average. It’s good to see both earnings and the dividend have improved – although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

Should investors buy Ford Motor for the upcoming dividend? It’s great that Ford Motor is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It’s disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Ford Motor looks solid on this analysis overall, and we’d definitely consider investigating it more closely.

On that note, you’ll want to research what risks Ford Motor is facing. For example, we’ve found 2 warning signs for Ford Motor (1 shouldn’t be ignored!) that deserve your attention before investing in the shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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4 weeks ago

1 3 minutes read