Ford Motor Company (NYSE:F) has been a dividend-paying stock since fiscal 2012 and the company pays cash dividends on a quarterly basis.
Therefore, Ford’s common stock shareholders will receive a quarterly cash dividend on the company’s common stocks.
However, Ford has suspended its dividend payments starting in fiscal 1Q 2020 because of the COVID-19 pandemic.
Here is an excerpt extracted from Ford’s 2020 annual filings regarding its dividend suspension policy:
While Ford has suspended the cash dividend in 2020, it reinstated the dividend in 4Q 2021 and the declared value was only $0.10 USD per share, giving a yield of less than 1% in 4Q 2021.
Since Ford has now resumed the cash dividends, can the company sustain the payment in 2022 or even increase the dividend rate?
In this article, we will find out how safe Ford’s dividend is and whether Ford can afford the dividend payout for the rest of 2022.
Let’s dive in!
Ford’s Trailing Dividend Yield
Let’s first look at Ford Motor’s historical dividend yield as shown in the chart above for the period from 2015 to 2021.
Historically, Ford’s dividend yield hovered around 6% on average for the last 6 years.
During the onset of the COVID-19 pandemic, Ford’s dividend yield soared beyond 12%, thanks to the plummeting stock prices.
However, Ford’s dividend yield started to plummet from its high of 12% to only 4% in Q2 2020 after Ford announced a dividend suspension in March 2020.
The dividend yield continued to decline for the rest of 2020 and plunged to 0% in 1Q 2021 as Ford continued to suspend the cash dividends.
As Ford had reinstated the quarterly cash dividends in 4Q 2021 to $0.10 USD per share, Ford’s dividend yield rose to 0.5% in November 2021.
As of March 2022, Ford’s dividend rate amounted to $0.20 on a TTM basis and the respective yield came to about 1.2%.
Ford’s Dividend History
The chart above shows Ford’s yearly historical dividend payments that dated back to 2012.
For your information, Ford did not pay any dividends prior to 2012 but has paid cash dividends between 2000 and 2006.
As such, Ford has suspended its dividend payment between 2006 and 2012.
Nevertheless, Ford has started to be a dividend-paying company again in fiscal 2012 at a dividend rate of $0.20 USD per share.
In subsequent years, Ford’s cash dividends continued to soar and topped out at $0.85 USD per share in fiscal 2016.
However, the dividend amount had remained flat between fiscal 2016 and 2019 at about $0.70 USD per share on average, due possibly to the challenging business environment.
In fiscal 2020, Ford’s cash dividend clocked only $0.15 USD per share, primarily driven by the dividend suspension which began in 2Q 2020.
Similarly, Ford’s cash dividend came in at only $0.10 USD per share in 2021, a slightly lower figure compared to that of the prior year, due mostly to the payment suspension which began in 2020.
Since Ford has resumed the cash dividend payments in 2021, Ford’s cash dividend continued to exist in 2022 and the respective rate came in at $0.10 as of 1Q 2022.
Ford’s Cash Payments For Dividends
In terms of cash payments for dividends, Ford paid about $2 billion in cash for dividend payments on a yearly basis.
Ford paid the most cash for dividends at more than $3 billion in fiscal 2016.
In fiscal 2020, Ford paid only $596 million in cash for dividends, a far lower figure compared to the historical highs.
In fiscal 2021, the cash payment further declined to only $403 million, a record low for the company.
While Ford’s cash payout for dividends in fiscal 2021 amounted to only $400 million, can Ford make a bigger cash payment for dividends in fiscal 2022?
Read on to find out.
Ford’s FY2022 Outlook
Ford’s cash dividend safety in fiscal 2022 depends largely on the company’s projected profits and free cash flow.
As shown in the snapshot above, Ford’s earnings or the adjusted EBIT is estimated to come in at $12.0 billion, a significantly higher figure than that of FY2021.
Similarly, Ford’s adjusted free cash flow (FCF) is projected to clock $6.0 billion for FY2022, also significantly higher than that of FY2021.
In short, Ford expects to make a record amount of profit and free cash flow in fiscal 2022 based on the company’s forecast.
While Ford may be expecting record profitability and cash for fiscal 2022, how does that translate to a larger or more reliable cash dividend?
That’s what we are going to find out in the next discussion.
Ford’s Projected Profits For FY2022
The chart above shows Ford’s adjusted EBIT, interest on debt and adjusted EBT (earnings before tax) for fiscal 2021 and prior fiscal years.
Figures for FY2022 are projected numbers while figures for prior fiscal years are historical numbers.
According to the chart, Ford’s FY2022 adjusted EBIT is expected to be slightly higher than that of FY2021 and the forecast results were even exceeding those from pre-COVID periods.
By the end of FY2022, Ford’s adjusted EBIT is estimated to come in at $12 billion on average, a record number for the company in the last 7 years.
Assuming that Ford’s interest on debt in FY2022 will be at the same level as that in FY2021, Ford will incur an estimated interest on debt of $1.8 billion.
After accounting for the interest expense, Ford’s EBT or earning before tax will come to about $10 billion in fiscal 2022.
Can this amount of profit cover Ford’s cash dividend payments?
Ford’s Projected Free Cash Flow For FY2022
Ford’s adjusted free cash flow had already accounted for the company’s capital spending while excluding the cash flow that comes from Ford Credit.
Therefore, Ford’s adjusted free cash flow is nearly the same as the free cash flow generated by the company’s automotive segment.
The adjusted free cash flow is an important metric in our evaluation of Ford’s cash dividend payout.
That said, Ford’s ability to pay a cash dividend will rest on the amount of adjusted free cash flow being generated in FY2022.
According to the chart, Ford expects to generate about $6 billion of adjusted free cash flow, an enormous amount compared to that of FY2020.
The level of adjusted free cash flow forecast for FY2022 was last seen in FY2016 and was one of the highest figures in the last 7 years.
In short, Ford expects to make a record amount of adjusted free cash flow for FY2022, one that excludes the cash flow from Ford Credit.
With this amount of free cash flow, will Ford be able to sustain or even increase the cash dividend payout for 2022?
Ford’s Cash Dividends Payout For FY2022
|Fiscal Year||Cash Payment For Dividends And Dividend Equivalents ($ Millions)||Diluted Shares Outstanding (In Millions)||Dividend Declared Per Common Share ($ USD)|
To find out how much cash dividend Ford can afford to pay, let’s take the figures from FY2019 which are shown in the table above.
In FY2019, Ford paid out roughly $2.4 billion of cash for dividends and dividend equivalents.
In the same fiscal year, Ford’s diluted shares outstanding totaled about 4.0 billion and this amounts to a dividend rate of about $0.60 USD per share.
Let’s assume that Ford were to pay the same amount of cash dividend for FY2022, Ford’s cash payments will total about $2.4 billion and the dividend rate will be about the same at $0.60 USD per share.
Ford’s diluted shares outstanding has not changed much in the last 5 years and therefore, the dividend rate per share for FY2022 will be about the same as that of FY2019.
In short, we are trying to find out if Ford can afford to pay the same amount of cash dividend in FY2022 as the one in FY2019 which was much higher than the one paid in 2020 and 2021.
Ford’s Dividend Payout Ratio
|Fiscal Year||Cash Payment For Dividends ($ Millions)||Adjusted EBIT ($ Millions)||Adjusted EBT ($ Millions)||Adjusted FCF ($ Millions)||EBIT Payout Ratio (%)||EBT Payout Ratio (%)||FCF Payout Ratio (%)|
The earnings and free cash flow data in the table above are seen in prior discussions.
That said, assume that Ford’s cash dividend for fiscal 2022 is the same as that of 2019 which is $0.60 USD per share or $2,400 million in terms of cash payment.
For the projected figure, the respective dividend payout ratios for fiscal 2022 with respect to earnings before tax and free cash flow will only be 23.4% and 39.8% as shown.
These payout ratios are much lower compared to those reported in fiscal 2019.
In other words, if Ford could afford to pay the cash dividends in FY2019, then the company should have no problem paying the same amount of cash dividends in FY2022 given the much higher profits and free cash flow projected for FY2022.
Ford’s Forward Dividend Yield
|Fiscal Year||Ford’s Stock Price ($ USD)||Dividend Declared Per Common Share ($ USD)||Forward Dividend Yield (%)|
We have seen that Ford can definitely afford to pay a much higher cash dividend at $0.60 USD per share in fiscal 2022.
The respective dividend yield will be at around 3.75% based on today’s stock price of $16 USD per share.
In short, if you buy Ford’s stock today at $16 USD per share, and Ford declares a cash dividend with a rate of $0.60 USD per share throughout fiscal 2022, your forward dividend yield will come to 3.75%.
In summary, the analysis of Ford’s cash dividend for fiscal 2022 shows that Ford Motors not only can sustain the dividend payment from fiscal 2021 but also increase the payout to at least $0.60 USD per share which is the same as what Ford paid in 2019.
Ford’s projected FY2022 earnings and free cash flow are expected to be much higher and the figures are even better than those reported during pre-pandemic periods.
In fiscal 2022, at a cash payout of roughly $2.4 billion, Ford’s dividend rate will be $0.60 USD per share and the forward dividend yield will come to about 3.75% based on a stock price of $16.
Therefore, Ford’s cash dividend is not only safe but may increase drastically in fiscal 2022.
References and Credits
1. All financial figures in this article were obtained and referenced from Ford’s quarterly and annual financial reports which are available in the following link: Ford’s Financials and Filings.
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