Ford Motor Company Maintains Segment-Leading 6.8% Dividend Yield (F)
By: Ned Piplovic,
While lagging sales drove the Ford Motor Company’s (NYSE:F) share price lower during the past several years, the company’s share-price decline has fueled the current dividend yield well past those of its peers in the Major Automotive Manufacturers sector.
Ford’s current 6.8% dividend yield is 65% higher than the second-highest yield of 4% in its industry segment that is offered by General Motors (NYSE:GM). Nonetheless, Ford has not boosted its regular quarterly dividend in the past four years.
However, instead of committing to higher future dividends by increasing regular dividend payouts, the company has paid a special dividend in the first quarter of each of the past three years. The lowest special dividend payout was in 2015 and equaled a third of the regular quarterly payout amount.
Despite the tough financial environment of Ford’s automotive division, the company still maintained a sustainable dividend payout ratio level by distributing just 47% of the company’s earnings. This current figure also marks a marginal improvement over the 50% five-year payout ratio average.
The Ford Motor Company has had a mixed history of dividend payouts since initiating distributions in 1983. After 10 years of flat dividend distributions, the company started boosting its dividends and enhanced its total annual payout by 135% over the following six years. The company’s quarterly payout peaked at $0.50 in 1999 before declining 90% to just $0.05 in the third quarter of 2012. Ford suspended its dividend payouts after that. Following five years of no dividend distributions, the company resumed distributing quarterly dividends in 2012.
The company has paid the same $0.60 annualized dividend for the past four years. Even with the flat dividend distributions over the past few years, Ford tripled its total regular dividend amount per year since reinstituting dividend distributions in 2012. This level of advancement corresponds to an average growth rate of more than 20% per year over the past six years.
In addition to the regular dividends, Ford rewarded its shareholders with three consecutive years of special dividend payouts since 2016 to deliver increased dividend income to the company’s shareholders. Unfortunately, the $0.05 special dividend for 2017 was lower than the $0.25 special dividend payout for 2016. The total dividend distribution for 2017 year fell short of the total payout in the previous year and broke the streak of consecutive total dividend payouts increases after just four years.
While only regular dividend distributions figure into the official dividend calculation, the addition of the $0.13 special dividend pushes the overall dividend yield for 2018 above 8%, which represents a significant payout level for income-seeking investors. Therefore, investors who see the current share-price drop as a buying opportunity could collect the 6.8% dividend yield on the next pay date in early March 2019 by taking a long position prior to the company’s next ex-dividend date. Ford announced on Jan. 16 that its first-quarter 2019 regular dividend will remain the same as the regular dividends paid in 2018 and will be paid on March 1 to shareholders of record at the close of business on Jan. 31.
Ford Motor Company (NYSE:F)
Based in Dearborn, Michigan and founded in 1903, the Ford Motor Company designs, manufactures and markets cars, trucks, sport utility vehicles (SUV’s) and electrified vehicles under the Ford, Lincoln and Troller brands. Additionally, the company’s Financial Services segment – Ford Credit – offers various automotive financing products for its automotive dealers and customers. The company also develops new automotive technologies through strategic partnerships with the Panasonic Corporation of North America and Qualcomm Technologies.
The current regular dividend of $0.60 per year, which corresponds to a 6.8% dividend yield, is 21.2% higher than the company’s own 5.6% average yield over the past five years. The company’s regular dividend yield of 6.8% is more than 240% above the 1.99% average dividend yield of the entire Consumer Goods segment. Additionally, as the highest yield in the Major Automotive Manufacturers industry segment, Ford’s current yield outperformed the segments 1.79% simple average yield by nearly 280%. Even compared to the 3.58% average yield of the segment’s only dividend-paying companies, Ford’s current yield is still 90% higher.
While the share price continues to fluctuate amid market volatility, the company’s current payout ratio indicates that at least the dividend distributions should be relatively safe from any cuts in the near future. Furthermore, the company’s financing entity – Ford Credit – has been providing strong cash flow over the past four years. The company intends to direct a portion of those funds towards supporting the regular dividend payouts and averting dividend cuts for the near future.
Additionally, the members of the Ford family – who collectively hold 40% of the company’s voting rights – receive a major portion of their annual income from dividend distributions. Therefore, the management at the Ford Motor Company will most likely make every effort to maintain the current level of regular dividend payouts and continue distributing any additional strong profits as special dividends.
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