Is Ford Stock a Buy for Its Dividend?
Key Points
Many investors buy Ford for its moderately-high 4.6% forward dividend yield.
Based on cash flow forecasts, Ford's regular quarterly payouts appear well-covered for now.
Given Ford's tendency to suspend dividends during "black swan" events, plus the stock's cyclical price action and poor dividend growth history, dividend-focused investors may want to look elsewhere.
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Ford Motor Company (NYSE: F) has a forward dividend yield of around 4.6%. Alongside its regular quarterly cash dividend of 15 cents per share, the automaker issues special dividends when the company achieves higher cash flow and profitability.
It's difficult to predict when Ford will pay out these special dividends. Based solely on the dividend, should dividend-focused investors make this a long-term holding?
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Ford's dividend history and recent fiscal performance offer clues
In the last 20 years, Ford has suspended its dividend twice: In 2007, ahead of the Great Recession, and in the aftermath of the COVID-19 outbreak in 2020. While Ford reinstated its dividend within two years of the pandemic, the earlier suspension lasted over five years. Put simply, Ford is willing to pull the dividend when times get tough.
That said, Ford's regular dividend appears well-covered. Based on current earnings forecasts, Ford has a forward payout ratio of just 30.6%, far lower than many popular dividend stocks. Management's full-year 2026 guidance calls for adjusted free cash flow of between $6 billion and $7 billion. Based on a current share count of around 4 billion outstanding, Based on a current outstanding share count of around 4 billion, Ford's 60 cents per share in annual dividends account for just 34% to 40% of this free cash flow figure.
Why I wouldn't buy for the dividend alone
Numerous headwinds have weighed on the automaker's profitability and price performance, including inflation, the rollback of its vehicle electrification pivot, and, more recently, tariffs. If these issues continue to ease, enabling Ford to report positive GAAP earnings in 2026 and 2027, the stock, trading at just 7 times forward earnings today, could re-rate to a higher earnings multiple.
However, would I buy Ford as a "set it and forget it" dividend stock? Given the cyclicality of both its operating and stock price performance, plus the risk that ongoing geopolitical and economic uncertainty drives the next "black swan event," not to mention Ford's poor track record of dividend growth, this is not a strong choice for dividend-focused investors.
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Thomas Niel 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.
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