Is Ford Stock a Buy for Its Dividend?

Source Motley_fool

Key Points

  • Ford's dividend yield is currently over 4.5%, which could be attractive for income investors.

  • Management raised its full-year guidance, which will more than cover the current dividend.

  • 10 stocks we like better than Ford Motor Company ›

Ford Motor Company's (NYSE: F) dividend history is one of severe ups and downs. From the Great Recession to the COVID-19 pandemic, Ford's dividend hasn't been immune to macroeconomic factors. Since 2022, however, the dividend has been consistent. So is it a buy now for income investors?

With the automaker's shares trading around $13, the dividend yield is impressively over 4.5%. That's well above the S&P 500 average. The $0.15-per-quarter cash payout hasn't grown since 2022, but Ford's financial picture is ultimately improving.

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Ford's management raised its full-year guidance recently to $10 billion to $11 billion in EBIT and adjusted free cash flow of $6 to $7 billion. This will cover the dividend with room to spare. The automaker also has significant liquidity on its balance sheet. While its EV unit is losing about $4 billion per year, the company is pivoting into energy storage, which could prove quite lucrative in the coming years.

An employee inspects a truck on a Ford assembly line.

Image source: Getty Images.

For long-term investors who understand that Ford remains subject to industry cycles, its dividend is well covered and increasingly durable. The downside is that the dividend hasn't grown. It would be nice to see Ford's improving financial performance reflected in its payouts to investors. My prediction is that this may happen as Ford Energy begins earning revenue, which could be in late 2027.

I think income investors should look further ahead when purchasing Ford for its dividend. Ford Energy could also be a significant driver of growth down the road. As of this writing, the stock is flat year to date.

Should you buy stock in Ford Motor Company right now?

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Catie Hogan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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