Ford Motor Co. (NYSE: F) has one of the largest dividend yields of any major U.S. company. At this point, it sits at 11.2% ($0.60 per share). Ford cannot maintain that dividend if its sales in China continue to plunge and American sales begin a sharp decline, which they almost certainly will.
One of the most notable things about big business since the rapid spread of COVID-19 is that they have begun to draw down most or all of their credit facilities as they worry about a lack of access to capital. Ford’s high costs and the strong chance of a cratering of revenue put it in a spot that is no better.
Reuters already has reported a sharp drop in foot traffic to car dealers. In some cases, those declines are already 30%. The chances that car sales in the United States will top 17 million as they have for four years are close to impossible. It is easy to see that a drop below 15 million is possible.
Among the recent news that shows retail outlets of all kinds are in trouble is that Apple Inc. (NASDAQ: AAPL) has closed all its retail stores outside China. This kind of reaction by companies with many branches or stores will continue.
Ford has $34 billion in cash and cash equivalents at the end of 2019. It will want to continue its $11 billion restructurings, to the extent that it can.
RBC Capital Markets told Bloomberg that Ford would need to cut its dividend to preserve capital. It was almost certainly right.
Get Ready To Retire (Sponsored)
Start by taking a quick retirement quiz from SmartAsset that will match you with up to 3 financial advisors that serve your area and beyond in 5 minutes, or less.
Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.
Here’s how it works:
1. Answer SmartAsset advisor match quiz
2. Review your pre-screened matches at your leisure. Check out the advisors’ profiles.
3. Speak with advisors at no cost to you. Have an introductory call on the phone or introduction in person and choose whom to work with in the future
Get started right here.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
