A 5.6% Yield From Ford: Attractive Dividend Stock to Buy or Hidden Trap?

Ford (NYSE: F) pays an alluring dividend. The automaker's payout currently yields 5.6%. That's several times higher than the S&P 500's dividend yield, which is currently less than 1.5%.

Here's a look at whether Ford's dividend is an attractive buy for income or a yield trap.

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Ford's sputtering dividend history

Ford currently pays a quarterly dividend of $0.15 per share ($0.60 annually). It has paid that quarterly rate since the beginning of 2023, when it hiked its payout from its prior rate of $0.14 per share. In addition, the automaker has made several special dividend payments in recent years ($0.15 per share in early 2025, $0.18 per share last year, and $0.65 per share in 2023). Those special dividends have enabled Ford to achieve its target of returning 40% to 50% of its adjusted free cash flow to shareholders each year.

While Ford's regular dividend payment has been stable in recent years and supplemented by special dividends, that hasn't always been the case. The car company has suspended its payout twice (once in 2006 and again in 2020). It didn't reinstate its dividend until 2012 following the first suspension and paused the payout for almost two years during the pandemic.

What does the future hold for Ford's dividend?

Ford entered this year filled with optimism. It ended 2024 in a strong position, delivering the highest revenue in its history. "Ford is becoming a fundamentally stronger company," stated CEO Jim Farley in the fourth-quarter earnings press release. He noted that the company offered customers a broad portfolio, while Ford Pro has a leading market position.

The company initially expected to make significant progress this year in its two biggest areas of opportunity (quality and cost), which positioned it to make more money in the future. It helped drive the view that Ford would generate $3.5 billion to $4.5 billion in adjusted free cash flow for the year after funding $8 billion to $9 billion of capital spending to support its business growth.

While that would have been down from $6.7 billion last year, it would have been plenty to cover its dividend payment. (Ford paid out $3.1 billion in dividends last year, which includes its supplemental payment.)

However, a lot has changed since the year started. The Trump administration has implemented tariffs on most imported goods, including those vital to the auto sector. That caused Ford to suspend its financial guidance during the first quarter, including its outlook for adjusted free cash flow.

On a positive note, Ford is entering this period of uncertainty in a position of financial strength. It ended the first quarter with $27 billion of cash on its balance sheet and $45 billion of liquidity, which "provides flexibility to continue to invest in profitable growth while managing current industry dynamics," commented CFO Sherry House in the first-quarter earnings press release.

Despite that strong financial position, Ford may be wise to reduce its dividend if tariffs have a meaningful impact on its earnings and cash flow. Most analysts who follow the company believe it will cut its dividend, potentially as soon as the next quarter. The consensus is that it will drop its payment to $0.12 per share, though some analysts think that's still too high for the current environment. If market conditions weaken materially (like they did in the financial crisis and pandemic), Ford might slam the brakes and stop paying dividends until conditions improve, as it has in the past.

Too risky for income-seeking investors right now

At more than 5.5%, Ford certainly offers an alluring dividend. Unfortunately, the high yield seems more like a trap than an opportunity these days. Given the uncertainty of tariffs and the company's spotty record of paying dividends when times get tough, it's best that dividend investors avoid this stock for now.

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Matt DiLallo has positions in Ford Motor Company. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.