Ford Will Cut Its Dividend

By Douglas A. McIntyre Published Mar 25, 9:15AM EDT

Quick Read

The Wall Street Journal says Ford Motor Co. (NYSE: F) will be forced to cut its dividend.
Investors and the Ford family would take a significant financial hit from this.

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The Wall Street Journal says Ford Motor Co. (NYSE: F | F Price Prediction) will cut its dividend. The paper’s view is that the car company won’t have a choice: “The question isn’t so much whether the payout gets cut, but how much.” The paper lists reasons that run from the financial burden of tariffs to declines in free cash flow to the accuracy of Ford’s financial guidance. On the other hand, the Ford family would take a financial hit, which shouldn’t be a consideration (probably) in the decision.

One of the most powerful arguments for a cut is a concern by Ford CEO Jim Farley. He told board member John Thornton that Chinese electric vehicles (EVs) are an “existential threat.” The only barrier between China’s EV competition in the United States is 100% tariffs. China’s EV companies do not face that challenge in many other parts of the world. Ford used to have a strong business in China. That has started to slip away. Its footprint outside the United States is exceptionally modest.

The company has also dumped billions of dollars into its EV initiative. Although Ford denies it, early last year, it lost over $100,000 for every EV it sold. Management said colossal losses in its EV business would continue by $5.0 billion to $5.5 billion in 2025. It had little to show for that investment. So far this year, the story is almost as bad as last year. Ford sold only 7,326 EVs in the U.S. during February.

According to Yahoo, the company’s dividend and yield are 7.32%. One reason the yield is so high is that the stock has fallen so far. Today, it trades for $10 a share. In January 2022, it was $25.

The Ford family would suffer from a dividend cut. They own less than 5% of the common shares but have 40% voting rights because of a second class of shares.

Bill Ford, the company’s executive board chair, should not consider decisions about the dividend for governance reasons.

Finally, the dividend is critical to investors. Ford’s shares have not been above $12 since July last year. People who assume they will make money on a surge in the stock are almost certainly mistaken.

Why Buy a Ford F-150 When You Can Drive a Better Car for Less Money?

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.