Ford’s (F) Dividend is Going Up In Smoke, and Shares Could Rally When It Does

24/7 Wall St. Key Points:

• Ford (NYSE: F) may consider cutting its dividend due to escalating capital demands for its EV segment, which is expected to cost $5–5.5 billion this year.
• Newly announced 25% tariffs on imported vehicles and components further pressure Ford’s cash flow, particularly impacting higher-end models like F-150s and SUVs.
• While a dividend cut could lower the yield from 7% to around 4%, the stock’s already depressed price may limit additional downside, especially if tariffs are resolved.
• Ford’s future is in jeopardy, but yours doesn’t have to be. Speak with a financial advisor today to learn whether you’re ahead, or behind on your retirement dreams. It’s completely free, and only takes a minute. You can get started with this quick quiz.

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Transcript:

[00:00:04] Lee Jackson: Doug, I know that you’re kind of a big fan of automobiles and you are a resident expert and I happen to read an interesting article published by some buddy named you and it speculated, I think, based on the Wall Street Journal that Ford could cut their dividend. Is that even possible?

[00:00:25] Doug McIntyre: Well, I think with the tariff problem it’s even more possible. But if you think about it for a second, going into this year, Ford still has needs massive amounts of capital just to run Its EV business. It said it right? Right. 5 billion and 5 and a half billion dollars this year on EVs. And so you know, what you look at is how much are they gonna have available to pay a dividend?

[00:00:55] Lee Jackson: Yeah,

[00:00:55] Doug McIntyre: the yield on the stock is like 7% depending on where the stock is any day.

[00:01:01] Lee Jackson: Yeah, yeah. Right. It’s like dollar a share, right? Yeah.

[00:01:04] Doug McIntyre: So, you know, there was a point at which Ford was 22 bucks, you know, like a year and a half ago. And you can say, well, okay, you know, we’re gonna give people 3% yield. But if you say, well, what’s their problem?

[00:01:17] Doug McIntyre: Their problem’s, cash. Now when I wrote that article, the tariff thing hadn’t come out yet. The 25% tariffs makes it even harder if Ford’s not in a bad position because they make more of their cars and get more parts than most people do. Yeah. In the US, right. But it’s still ugly. It doesn’t matter.

[00:01:35] Doug McIntyre: It’s, it’s just that they were prettier, ugly.

[00:01:39] Lee Jackson: Yeah. And Ford still, if I’m not mistaken, and since we both kind of grew up there, the Ford still has big plants in and around Detroit River Rouge plant. It’s still there, isn’t it?

[00:01:49] Doug McIntyre: It’s all, yeah. The Detroit still has a manufacturing presence. The River Rio plant is.

[00:01:54] Doug McIntyre: I think one of the largest car plants in the United States.

[00:01:58] Lee Jackson: Yeah. It has been for years, right?

[00:02:00] Doug McIntyre: Yeah. So if Ford gets tight, which right now it could, the first place, as you know, any company goes, when they start to get tight is if they have a big juicy dividend.

[00:02:12] Lee Jackson: Right.

[00:02:12] Doug McIntyre: And they’ve got a big juicy dividend.

[00:02:15] Doug McIntyre: And if your, if your management, I think this is what you say to yourself, okay, if I cut my dividend in half, what’s gonna happen? The stock’s near a 52 week low.

Right?

[00:02:26] Doug McIntyre: So you, I mean, are people gonna suddenly sell, sell the stock because they’ve now got a 4% yield?

[00:02:35] Lee Jackson: Probably not. Probably not. And in today’s, you know, when you’re looking at a, at a a 10 year treasury, that’s, that will be about that same yield.

[00:02:45] Lee Jackson: A lot of people will say, no, okay, I hate to give up the juicy dividend, but I wanna keep the stock so I can live with a, you know, three and three quarters or 4% dividend. I think you’re right.

[00:02:56] Doug McIntyre: Well, here’s another argument I would make about the stock itself. So putting this dividend off to the side, if this tariff issue gets resolved, you go from a stock that’s say a $9 stock to maybe an 11 or $12 stock, just on the relief, right?

[00:03:14] Doug McIntyre: That you’re not gonna be paying. Because if you look at these tariffs right now, if you take some of the bigger vehicles that Ford has, the expensive ones, you’re probably looking at a, take a $50,000 Ford, you know, sports utility vehicle, right? Add $7,000 on that, and that’s what you’re looking at now, how, how hard is it to sell that car?

[00:03:42] Doug McIntyre: When a lot of people on the road right now have cars that are four or five years old, I’m gonna hang on to mine. I’m not gonna trade it in and get slaughtered on the price, so, no,

[00:03:52] Lee Jackson: no, and that makes sense. That makes sense. And, and, and you’re right on the, on on some of those bigger, and you know, where I live in kind of the mid south, south, you know, up near Tennessee, you should see some of these, you know, F1 fifties and F two fifties that are gigantic.

[00:04:09] Lee Jackson: They’re 65 and 75 and $85,000. So a big tariff would, would really jack up the higher priced ones. Yeah.

[00:04:18] Doug McIntyre: So I’m looking at Ford right now. It’s down over 2%. virtually all of that is on the tariffs, is on the tariff news. So I mean, it’s probably lost 4% in that since that came out. Ford has a little bit less, uh, it’s, you know, it has somewhat more cars and parts made in the United States, but if I’m an investor right now, there are two or three reasons that Ford cuts its dividends, EVs, and the tariffs are at the top of that list. But they’re not the only ones.

[00:04:51] Lee Jackson: Right. Well, so let me ask you this in, in kind of wrapping it up, do you think they would actually take that shot and lower the dividend?

[00:05:00] Lee Jackson: Considering the Ford family is the biggest benefactor from that dividend?

[00:05:05] Doug McIntyre: I’m gonna pause on that because I don’t want to say that Mr. Ford, Bill Ford, who runs the company, would ever do anything like that as a fiduciary. So I’m gonna, I’m gonna leave it at that. I’m just gonna say he’s a fiduciary. We can, we can leave it there.

[00:05:23] Lee Jackson: Well, somebody at the Wall Street Journal thought of it.

[00:05:25] Lee Jackson: I mean, that’s kind of where you derive the basis for your article. Right? And so maybe we’ll have to get in touch with those folks. Yeah, I’ll call ’em up. Yeah, let’s do that. Let’s do that.

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