Ford Will Cut Its Dividend
The Wall Street Journal says Ford will be forced to cut its dividend. Investors and the Ford family would take a significant financial hit from this. The post Ford Will Cut Its Dividend appeared first on 24/7 Wall St..
The Wall Street Journal says Ford Motor Co. (NYSE: F) will cut its dividend. The paper’s view is that the car company won’t have a choice: “The question isn’t so much whether the payout gets cut, but how much.” The paper lists reasons that run from the financial burden of tariffs to declines in free cash flow to the accuracy of Ford’s financial guidance. On the other hand, the Ford family would take a financial hit, which shouldn’t be a consideration (probably) in the decision.
24/7 Wall St. Key Points:
-
The Wall Street Journal says Ford Motor Co. (NYSE: F) will be forced to cut its dividend.
-
Investors and the Ford family would take a significant financial hit from this.
-
Take this quiz to see if you’re on track to retire. (sponsored)
One of the most powerful arguments for a cut is a concern by Ford CEO Jim Farley. He told board member John Thornton that Chinese electric vehicles (EVs) are an “existential threat.” The only barrier between China’s EV competition in the United States is 100% tariffs. China’s EV companies do not face that challenge in many other parts of the world. Ford used to have a strong business in China. That has started to slip away. Its footprint outside the United States is exceptionally modest.
The company has also dumped billions of dollars into its EV initiative. Although Ford denies it, early last year, it lost over $100,000 for every EV it sold. Management said colossal losses in its EV business would continue by $5.0 billion to $5.5 billion in 2025. It had little to show for that investment. So far this year, the story is almost as bad as last year. Ford sold only 7,326 EVs in the U.S. during February.
According to Yahoo, the company’s dividend and yield are 7.32%. One reason the yield is so high is that the stock has fallen so far. Today, it trades for $10 a share. In January 2022, it was $25.
The Ford family would suffer from a dividend cut. They own less than 5% of the common shares but have 40% voting rights because of a second class of shares.
Bill Ford, the company’s executive board chair, should not consider decisions about the dividend for governance reasons.
Finally, the dividend is critical to investors. Ford’s shares have not been above $12 since July last year. People who assume they will make money on a surge in the stock are almost certainly mistaken.
Why Buy a Ford F-150 When You Can Drive a Better Car for Less Money?
The post Ford Will Cut Its Dividend appeared first on 24/7 Wall St..
