Ford Motor Company (NYSE:F) the stock will trade ex-dividend in three 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 a consequence because every time a stock is bought or sold, the trade takes at least two business days to complete. Therefore, if you purchase Ford Motor stock on or after August 10, you will not be entitled to receive the dividends paid on September 1.
The company’s forthcoming dividend is US$0.15 per share, following on from the last 12 months, when the company distributed a total of US$0.60 per share to shareholders. Calculating the value of last year’s payout shows that Ford Motor has a final yield of 3.9% at its current share price of $15.3. Dividends are a major contributor to return on investment for long-term holders, but only if dividends continue to be paid out. We need to see if dividends are covered by earnings and if they are growing.
Check out our latest analysis for Ford Motor
Dividends are usually paid out of the company’s earnings. If a company pays more dividends than it earns in profit, then the dividends can be unsustainable. Ford Motor paid only 10% of its profits last year, which in our opinion is very low and leaves a lot of margin for unforeseen circumstances. 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. The good news is that it paid only 20% of its free 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 Grown?
Stocks in companies that generate sustained profit growth are often the best dividend prospects, because it’s easier to lift dividends when earnings increase. If profits fall far enough, the company could be forced to cut its dividends. It is encouraging to see that Ford Motor has increased its revenue rapidly, up 20% per year for the last five years. Ford Motor’s earnings per share have shot forward like a Road Runner on track and field days; hardly stops even for a naughty “beep-beep”. We also like that he reinvested most of his profits in his business.’
Many investors will judge a company’s dividend performance by evaluating how much dividend payments have changed over time. In the last 10 years, Ford Motor has increased its dividend by an average of about 12% per year. It is interesting to see that both earnings and dividends per share have grown rapidly over the last few years.
To Sum It Up
From a dividend perspective, should investors buy or avoid Ford Motor? 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. It’s a promising combination that should mark this company as worthy of more attention.
On that note, you want to research what risks Ford Motor faces. To help with this, we have found 2 warning signs for Ford Motor (1 potentially serious!) that you should be aware of before buying a stock.
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 stocks mentioned.
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