Restoring Ford's Dividend Is Tricky, Could Follow Resumption At GM

Nov. 16, 2020 1:50 PM ETFord Motor Company (F)GM43 Comments
Doron Levin profile picture
Doron Levin


  • Ford Motor Co.’s recent third quarter results and the promotion of Jim Farley to CEO have underscored the question of when the automaker’s dividend will be restored.
  • Farley signaled that capital outlays to finance migration to electrification are significant, reflected in the rollout of the Mustang Mach-E in North America and introduction of the E-Transit.
  • Farley declined to discuss dividend resumption with analysts, postponing the subject until the spring. If Ford’s financial performance is decent through March, the automaker could distribute a token amount.
  • Several positive factors potentially bear on cash flow. But investors should be prepared for a dividend drought of unknown duration, as capital pressures and economic weakness could be substantial.
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Ford Motor Company’s (NYSE:F) solid third quarter earnings report has raised hopes among investors that the automaker is back on track, beating analyst estimates, after a calamitous pandemic-induced shutdown during the second quarter that produced a pre-tax quarterly loss of $1.9 billion.

Automotive revenue and adjusted earnings per share in the third quarter were well ahead of expectations, as pent-up demand for vehicles spurred retail sales by dealers who were ordering every vehicle that Ford factories could manufacture. Strong demand meant that Ford was able to keep retail financial incentives in check, thus strengthening net pricing.

Ford is in the midst of a multi-year turnaround, the point of which is to reduce warranty costs, increase market share and make its operations – especially vehicle development and manufacturing – more efficient and competitive.

Ford Share Prices Battered by Pandemic

Ford share prices – battered during the first weeks of the pandemic – are up 65% over the past six months, despite no clear signals when the suspended dividend would be resumed. Asked about the dividend during the third quarter call with analysts, newly-promoted CEO Jim Farley dodged the question.

Ford moves Jim Farley to COO as Hinrichs retires

Ford CEO Jim Farley

Source: Ford Motor Co.

“I don't think this is the time to have that discussion,” Farley said. “I think we need to have that framed up in our total capital strategy and calls on capital and where we're headed as a business and I think next spring would be the time to do that.”

Farley noted in his Oct. 29 earnings call with analysts that demands on capital for electrifying Ford models such as the Mustang Mach-E, a new commercial van and, eventually, the F150 pickup are substantial.

He noted that Ford is in the “first inning” of electrification and well along preparing for the next stage of development.

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This article was written by

Doron Levin profile picture
I am a journalist based in Detroit, having spent almost my entire career writing about business and economic subjects for The Wall Street Journal, New York Times, Detroit Free Press and Bloomberg. I'm the author of two books and am an acknowledged expert on the world automotive industry.

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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