With a 4.06% Yield, Is Ford a No-Brainer Dividend Stock to Buy in June?
Key Points
Ford's dividend yield looks strong because of the stock’s low valuation.
Cyclical demand and low profits add risk to the durability of the quarterly payout.
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Ford Motor Company (NYSE: F) shares have been on a tear. In the past 12 months, they have climbed 44% (as of June 5).
In three of the last four quarters, the business reported profits that exceeded analyst estimates. Market sentiment toward the automotive stock has also improved, as the price-to-earnings (P/E) ratio has expanded by 38% in the past year.
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Ford's dividend yield is still meaningful at 4.06%. Is this a no-brainer dividend stock to buy in June?
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Even after its huge surge, the valuation remains low. Ford shares trade at a current P/E multiple of 11.3. This represents a 56% discount to the broader S&P 500 index.
But investors shouldn't rush to buy what they think might be a compelling value stock.
Ford's earnings have historically been low, which adds material financial risk because the company can face cyclical demand. In a recession or any other situation that pushes households to delay car purchases, sales can decline. And Ford might start to post net losses.
This can force management's hand to conserve critical financial resources. The quarterly payout could be reduced or paused until the macro backdrop improves. This isn't a concern with companies generating robust profits.
Ford isn't the best dividend stock to buy right now.
Should you buy stock in Ford Motor Company right now?
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Neil Patel 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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