Last update on 2024-06-27

Ford Motor (F) - Dividend Analysis (Final Score: 3/8)

Ford Motor's (symbol F) dividend analysis reveals a 3/8 score, highlighting review of performance, stability, and potential risks in their dividend policy.

Short Analysis - Dividend Score: 3

We're running Ford Motor (F) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The analysis evaluates Ford Motor's (F) dividend performance and stability based on an 8-criteria scoring system and assigns a score of 3. Although Ford has a high dividend yield of 10.2543%, this yield has been volatile over the years, reflecting its financial inconsistency. The dividend growth rate has been inconsistent, with both extreme hikes and cuts. The average payout ratio is significantly higher than the sustainable threshold of 65%, showing exceedingly high and negative payout ratios, signaling an unstable payout strategy. EPS has shown inconsistency in covering dividends, leading to further concerns. While recent years indicate better free cash flow coverage, historical patterns have been unstable. Ford's dividends haven't been stable historically, and it has not maintained a 25-year consecutive payment record. Ford also struggles with reliable stock repurchases.

Insights for Value Investors Seeking Stable Income

Given the analysis, investors seeking stable and reliable dividend income may want to be cautious with Ford Motor (F). Despite its high dividend yield, the volatility and instability in its payout ratio, dividend payments, and earnings coverage suggest it may not be the best choice for long-term, income-focused investment. It could be worth considering only if you are prepared for potential risks and high variability in returns.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

explain the criterion for dividend yield and why it is important to consider

Ford Motor (F) has a current dividend yield of 10.2543%, which is significantly higher than the industry average of 2.91%. In the past 20 years, Ford's dividend yield has been highly volatile, reflecting varied dividend payments and fluctuating stock prices. For instance, the past demonstrates Ford's non-payment of dividends between 2005 and 2012 attributed to financial strains. From 2016 to 2023, there have been periods of notable high yields, like in 2018 (9.5425%) and 2023 (10.2543%), arising due to significant dividend per share despite lower stock prices. The contrasting industry average, mostly under 2.5%, reflects Ford's higher risk/reward profile. While this impressive yield may entice income-focused investors, its sustainability remains questionable given the evident volatility based on past data. The overall trend suggests Ford’s yield is advantageous but potentially volatile. Ford investors should weigh high returns against potential risks.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate criterion examines the annual rate at which a company's dividend payments have increased. A consistent growth rate higher than 5% is generally seen as a positive indicator of a company's financial health.

Analyzing Ford Motor's Dividend Ratio data over the last 20 years, several key trends emerge. Firstly, it is evident that there is significant volatility in the dividend rate, as seen from extreme fluctuations such as -100% in 2007 to +400% in 2022. This does not indicate a consistent growth, and it raises concerns about dividend stability. The average dividend ratio of approximately 22.73% over this period might seem above the 5% threshold, but the underlying volatility could be indicative of underlying financial turbulence or significant restructuring phases. Additionally, several years recorded a 0% growth rate, emphasizing periods where no dividends were paid. Consequently, despite the high average growth rate, the inconsistency and volatility signify that this trend is not particularly good when considering dividend stability and growth potential.

Average annual Payout Ratio lower than 65% in the last 20 years?

The payout ratio indicates the percentage of a company's earnings paid out as dividends to shareholders. An average ratio below 65% is considered sustainable.

Ford Motor's average payout ratio over the last 20 years stands alarmingly high at 326.20%, driven by extreme outliers like 6,355.93% in 2019. With several years showing a payout ratio of 0%, as well as negative ratios, the overall trend indicates instability. Given the frequent years of 0% and extremely high or negative values, Ford's payout strategy appears unpredictable and risky. Therefore, Ford's payout ratio does not meet the sustainable threshold and is considered bad for long-term dividend reliability.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings

To determine if dividends are well covered by the earnings, we need to examine the Earnings per Share (EPS) relative to the Dividend per Share (DPS). If EPS consistently exceeds DPS, it indicates that the company generates sufficient earnings to cover its dividend payouts, suggesting financial stability and a lower likelihood of dividend cuts. In Ford Motor's case, the data shows considerable volatility in EPS over the years (ranging from a peak of 4.9168 to a trough of -6.7126), accompanied by sporadic periods where no dividends were announced (0 DPS values from 2006-2011). When EPS is negative or nearly so, covering dividends becomes impossible. From 2010, positive EPS values are observed alongside gradually increasing DPS, but their cover ratios reveal inconsistency—sometimes healthy (0.793 in 2018) and sometimes poor (-0.037 in 2006). The most concerning periods are when EPS fails to cover DPS (e.g., 2020 EPS: -0.3219 vs. DPS: 0.15). The overall trend shows a mixed bag: while there are periods of strong coverage and responsible payouts, the volatile earnings cast doubt on Ford’s long-term dividend continuity. Recent trends indicate improvement (2021's cover at 0.022), but it’s essential to monitor EPS relative to DPS closely.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow indicate that the company generates sufficient free cash flow to comfortably meet its dividend obligations, which is crucial for dividend sustainability.

Analyzing the historical data of Ford's free cash flow and dividend payout amount, we observe significant fluctuations. For instance, in 2003, the coverage ratio was approximately 5.9%. This percentage dropped further to 4.79% in 2004. However, there were years without dividend payouts, such as 2007-2010, due to financial strain, evidenced by the negative free cash flow of -$6.875 billion in 2008. Positive trends emerged after, with notable years: 2013 at 21.45%, 2014 at 40.91%, and 2023 showing an impressive 74.75%. Despite the encouraging recent data, it is essential to consider past volatility. The gap from 2021, with a ratio of 4.22%, to the rebound in 2023 highlights potential instability. While the substantial increase in 2023 is promising for current investors, historical inconsistencies warrant cautious optimism regarding long-term sustainability. Mechanisms to maintain such robust free cash flow are key for Ford to continue supporting its dividend payments reliably.

Stable Dividends Since the Company Began Paying Dividends?

This criterion measures the stability and reliability of a company's dividends, crucial for investors relying on steady income. Dividends indicating stability are preferred.

Ford Motor shows significant volatility in its dividend payments over the past 20 years. For instance, the company entirely halted dividends for several years from 2006 to 2010. More recently, it exhibited a significant drop in 2020. Returns such as 0.4 in 2003 to 0 in 2007 or crashing from 0.75 in 2019 to 0.15 in 2020 are substantial declines. Therefore, Ford fails this criterion, indicating instability and posing risks for income-focused investors.

Dividends Paid for Over 25 Years?

A company paying dividends for over 25 consecutive years is often a sign of financial health and stability, indicating its ability to generate consistent earnings and return value to shareholders.

From the given data, it's evident that Ford Motor (F) hasn't paid dividends consistently for over 25 years. They halted payments between 2007 and 2011, which is a significant break in continuity. Moreover, the fluctuation in dividend amounts paid over the years shows inconsistency. This inconsistency can be seen as a negative trend, especially for income-focused investors seeking stable returns. Overall, this trend indicates periods of financial strain or strategic shifts, both of which can be concerning for long-term dividend-seeking investors.

Reliable Stock Repurchases Over the Past 20 Years?

Interpret the results: Number of Share last 20 years: {'year': {'values': ['2003', '2004', '2005', '2006', '2007', '2008', '2009', '2010', '2011', '2012', '2013', '2014', '2015', '2016', '2017', '2018', '2019', '2020', '2021', '2022', '2023']}, 'numberOfShares': {'values': [1832000000, 1927745665, 1927619048, 1879000000, 1979000000, 2273000000, 3159302326, 4178000000, 4111000000, 4015000000, 4087000000, 4045000000, 4002000000, 3999000000, 4001052632, 3996739130, 3972000000, 3973000000, 3991000000, 4014000000, 3998000000]}} Reliable repurchased years last 20 years: ['2005', '2006', '2011', '2012', '2014', '2015', '2016', '2018', '2019', '2023'] Average repurchased last 20 years: 4.4891

Number of Share last 20 years: {'year': {'values': ['2003', '2004', '2005', '2006', '2007', '2008', '2009', '2010', '2011', '2012', '2013', '2014', '2015', '2016', '2017', '2018', '2019', '2020', '2021', '2022', '2023']}, 'numberOfShares': {'values': [1832000000, 1927745665, 1927619048, 1879000000, 1979000000, 2273000000, 3159302326, 4178000000, 4111000000, 4015000000, 4087000000, 4045000000, 4002000000, 3999000000, 4001052632, 3996739130, 3972000000, 3973000000, 3991000000, 4014000000, 3998000000]}} Reliable repurchased years last 20 years: ['2005', '2006', '2011', '2012', '2014', '2015', '2016', '2018', '2019', '2023'] Average repurchased last 20 years: 4.4891