Regular readers will know we love our dividend on Simply Wall St, which is why it’s interesting to see Ford Motor Company (NYSE:F) will trade ex-dividends in the next 3 days. Usually, the ex-dividend date is one business day before the record date which is the date on which the company determines which shareholders are eligible to receive the dividend. The ex-dividend date is an important date to note because any share purchase made on or after this date may mean a late settlement that does not appear on the listing date. Thus, you can purchase Ford Motor shares before August 10th to receive dividends, which the company will pay on September 1st.
The company’s next dividend payout is $0.15 per share, behind last year when the company paid a total of $0.60 to shareholders. Based on last year’s payout, Ford Motor has a final yield of 3.9% of its current share price of $15.3. Dividends are an important source of income for many shareholders, but the health of the business is critical to maintaining those dividends. That’s why we should always check whether dividend payments appear sustainable, and whether the company is growing.
Check out our latest analysis for Ford Motor
Dividends are usually paid out of a company’s earnings, so if a company pays more than it earns, the dividend is usually a higher risk of being cut. Ford Motor only pays 10% of its after-tax profits, which is very low and leaves plenty of breathing room in the event of an adverse event. However cash flow is usually more important than profit for assessing the sustainability of dividends, so we should always check whether the company is making enough money to pay its dividends. What’s good is that the dividends are well covered by free cash flow, with the company paying out 20% of its cash flow last year.
It is positive to see that Ford Motor’s dividends are covered by profits and cash flow, as this is generally a sign that the dividends are sustainable, and a lower payout ratio usually indicates a larger margin of safety before the dividend is cut.
Click here to view the company’s payout ratios, plus analyst forecasts for future dividends.
Have Profits and Dividends Growed?
Businesses with strong growth prospects are usually the best dividend payers, as it is easier to grow dividends when earnings per share improve. Investors love dividends, so if earnings fall and dividends decrease, expect the stock to sell off massively at the same time. That’s why it’s great to see Ford Motor’s revenue skyrocket, up 20% annually for the last five years. Ford Motor looks like a truly thriving company, with earnings per share growing at a rapid pace and the company reinvesting most of its profits in the business.
Another key way to measure a company’s dividend outlook is to measure its historical dividend growth rate. In the last 10 years, Ford Motor has increased its dividend by an average of about 12% per year. It’s great to see earnings per share growing rapidly over the past few years, and dividends per share growing along with it.
To Sum It Up
Is Ford Motor getting what it takes to maintain its dividend payout? It’s great that Ford Motor is increasing earnings per share while paying a low percentage of its revenue and cash flow. It’s disappointing to see dividends have been cut at least once in the past, but as is the case now, the low payout ratio suggests a conservative approach to dividends, which we prefer. Ford Motor looks solid in this analysis overall, and we’d definitely consider investigating it more closely.
So even though Ford Motor looks good from a dividend perspective, it’s always a good idea to always be aware of the risks involved in this stock. We have identified 2 warning signs with Ford Motor (at least 1 significant one), and understanding this should be part of your investment process.
Generally, we would not recommend buying only the first dividend stock you see. this a curated list of interesting stocks that are strong dividend payers.
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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our article is not intended as financial advice. This does not constitute a recommendation to buy or sell any stock, and does not take into account your goals, or your financial situation. We aim to provide you with long-term focused analysis driven by fundamental data. Note that our analysis may not account for price-sensitive company announcements or recent qualitative material. Simply Wall St has no positions in any of the listed stocks.