Is Ford's Lucrative 6% Dividend Yield Safe?

Group 1: Company Performance and Financials - Ford recorded a surge in warranty costs last year and is projected to lose about $5 billion from its electric vehicle division in 2024 [1] - The company has struggled to generate meaningful earnings overseas [1] - Despite challenges, Ford's adjusted free cash flow for the first nine months of 2024 was nearly$6 billion, with a strong balance sheet showing cash of approximately $28 billion and total liquidity of about$46 billion [7] Group 2: Dividend Appeal - Ford's dividend yield of 6% is significantly higher than the S&P 500's average yield of 1.2%, making it attractive for income investors [2] - The company often pays supplemental dividends when generating extra cash flow, targeting a consistent return of 40% to 50% of adjusted free cash flow to investors [3] - The Ford family, which controls 40% of the company's board through special Class B shares, has a vested interest in maintaining dividend payouts [4][5] Group 3: Dividend Safety and Future Outlook - The question of whether Ford's dividend is safe remains, but the family's control and interest in dividends suggest it is less likely to be cut unless in dire circumstances [6] - Ford's commitment to returning value to shareholders is primarily through dividends rather than stock buybacks, despite the cyclical nature of the automotive industry [8] - Investors must consider that while the dividend is critical, the stock price has been stagnant for years, indicating the need for a turnaround in various business aspects for price appreciation [9]