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Ford: How Safe Is The Dividend?

Mar. 05, 2018 3:10 PM ETFord Motor Company (F)GM79 Comments
William Sabin profile picture
William Sabin


  • Will newly announced steel tariffs derail Ford’s sales?
  • Is Ford’s 5.8% dividend sustainable?
  • Are trade wars 'good and easy' to win as President Trump tweeted last week?

Ford, Trump, Tariff, dividendFord, Trump, Tariff, dividend

With a dividend yield around 5.8% (excluding the special dividend), Ford’s (NYSE: F) stock looks very attractive to dividend chasers. However, However, one needs to be careful buying a stock just for its dividend. For example, if you bought and held Ford from 2002 until now, you would have nothing but the dividend to show for the holding period. If, however, you bought in 1998, you would be approximately 50% underwater in the stock.

Car manufacturers are cyclical – profits are generally great in good times, and poor during times of recession. Losses, due to a large drop in sales, can lead a company to cut their dividend especially when the yield is significantly above market.

Sales & Earnings Overview

As I mentioned in a previous article, Ford posted positive sales growth 2017 October-December, while GM saw consistent year-over-year (YoY) declines. Ford's revenue was $38.5 billion compared to GM of $37.7 billion.

Ford had a mixed 2017 4Q. Revenue was $41.3 billion, which rose 6.7% YOY which beat analyst expectations by $4.3 billion. 4Q2017 EPS was $0.39, a $0.03 miss versus analyst expectations.

GM also had strong quarterly earnings. Revenue of $37.7 billion, fell 5% YOY. Adjusted 4Q2017 EPS was $1.65, $0.27 ahead of estimates. This set up GM with the best-ever fourth quarter in adjusted earnings before interest and taxes - $3.1 billion, a rate up 18.7 percent from last year.

What is a tariff?

Simply, a tariff is a tax on imports between sovereign states. Trump made the surprise announcement on Thursday that he wants a 25% tariff on imported steel and a 10% tariff for aluminum. Trump wants to increase U.S. production of these metals to combat, what he sees as, unfair trade practices.

While some would argue that there is a time and place for

This article was written by

William Sabin profile picture
Invest Smarter.  Build wealth.  Live free.William Sabin is the Trade Small, Trade Often Officer. William is a CPA and CMA with experience in public accounting as well as finance, manufacturing and oil & gas industries. He has a penchant for investing – his grandfather taught him about investing and trading stock options at 11 years old. With over 35 years of investing experience, he is an avid trader, value seeker, and is focused on financial freedom to open true freedom in life. The reason and the "why" I write articles on Seeking Alpha are to help others see through the array of articles and opinions of investment and trade ideas. As a financial coach, my objectives are to help you: 1) invest wiser, 2) build long-term wealth, 3) get financially and mentally ready for retirement, and 4) to help you live free. As a Seeking Alpha contributor, William generally writes on retirement strategies including stocks that appear to be undervalued using fundamental analysis and charting to time entry and exit points.  William has written for several publications including Seeking Alpha, financial magazines as well as for the U.S. Congress on international tax reform.Please visit focusonfreedoms.com for further interests, strategies, expertise, and experiences to help you gain freedom in life. Follow William on Twitter: @FocusOnFreedoms www.focusonfreedoms.comwww.optionstradingpilot.com

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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