Is Ford's Lucrative Dividend About to Get Slashed?

Core Viewpoint - Analysts predict a potential cut in Ford's dividend due to various internal and external challenges, despite the company currently maintaining a 5.2% yield on its dividend [1] Financial Performance - Ford is expected to pay out $0.75 per share in dividends for 2025, which includes a base quarterly payout and a supplemental dividend of $0.15 per share [4] - The company anticipates a total dividend payout of approximately $3 billion for the year, with a payout ratio of around 86% based on adjusted free cash flow estimates of $3.5 billion to $4.5 billion [5][6] External Challenges - Ford faces significant challenges from tariffs, which are projected to impact pre-tax earnings by about $2 billion, an increase from a previous estimate of $1.5 billion [2] - Quality concerns and rising warranty costs have also negatively affected Ford's financial performance [2] Cash Position - Ford's balance sheet shows over $28 billion in cash and $46 billion in liquidity, providing the company with the ability to fund dividends and invest in growth opportunities despite short-term challenges [8] Shareholder Considerations - The Ford family, holding a significant voting power through Class B shares, received $55 million in dividends in 2024 and is likely to prefer maintaining dividend stability [9] - Competition with General Motors, which recently increased its dividend, adds pressure on Ford to maintain its own dividend to avoid negative optics [10] Future Outlook - Analysts express concerns about Ford's ability to maintain its dividend in the near term, but there is a belief that the company will focus on improving profitability in its Model-e division and generating higher-margin business from its Ford Pro division [10]