There Goes the Dividend -- Now What for Investors?

Detroit automakers, commonly thought of as Ford Motor Company (NYSE: F), General Motors (NYSE: GM), and Stellantis (NYSE: STLA) thanks to its Chrysler heritage, have seen wildly different stock prices recently. Over the past three years GM nearly doubled its stock price, Ford posted a modest 11% gain, and Stellantis shed more than half its value. For investors considering buying into a potential Stellantis turnaround, and rebound in stock price, there's a little bad news to digest first.

Goodbye, dividend

Recent announcements from automakers regarding electric vehicle (EV) pullbacks have been extremely painful, financially speaking, and emphasize how expensive it can be when decision makers get things wrong or markets develop much more slowly than anticipated, as was the case with the U.S. EV industry.

Image source: General Motors.

Stellantis announced $25.9 billion in one-time charges, driven largely by $20 billion for EVs and $4.1 billion for warranty costs. The one-time charge even managed to top rival Ford, which recently announced its own $19.5 billion charge to pivot its strategy away from EVs and toward hybrids and extended range vehicles.

While write-downs are generally noncash, reflecting money already spent, Stellantis' charge includes $7.7 billion cash out the door going forward. That pressure on cash in the near term, along with the company's operating profit swinging to a second-half 2025 loss of $1.6 billion, caused Stellantis to suspend its 2026 dividend.

Rebound coming?

Stellantis has a massive turnaround on its hands under new CEO Antonio Filosa. Filosa will have to navigate tariffs and trade policy changes, decide which of Stellantis' many brands need significant investment, repair relations with its dealership network and suppliers, and dial back its EV plans.

That said, 2026 is expected to be a better year for investors. Stellantis is projected to generate an operating profit of roughly $7 billion in 2026, compared to a more modest $3 billion in 2025. The redesigned Jeep Cherokee and freshened Grand Wagoneer hitting dealerships, with more marketing dollars being spent, have the automaker aiming for a U.S. retail sales gain of 25% in 2026, which would reverse seven consecutive years of U.S. sales declines.

Investors should also note that Moody's Ratings downgraded Stellantis' credit rating citing that profitability would take longer than expected due to the costs of dialing down its EV plans. Moody's moved Stellantis down one notch to Baa3, which is the lowest level indicating an investment grade rating. Essentially, the downgrade is a signal of financial strain, increased risk, and uncertainty, which generally equates to higher costs for Stellantis to borrow and fund growth or its turnaround.

Investors considering scooping up shares of Stellantis after its rapid plunge, hoping for a stock price rebound during a turnaround, should probably pump the brakes. Stellantis has a number of difficult challenges to overcome, and entire brands to rebuild, that will require significant time. Investors interested in the automotive industry would be wise to look into thriving automakers such as Ferrari and General Motors.

Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool has positions in and recommends Ferrari. The Motley Fool recommends General Motors and Stellantis. The Motley Fool has a disclosure policy.