Ford Motor Company (NYSE:F) has been a regular dividend payer since 2012 which means shareholders will receive a quarterly cash dividend on the company’s common stocks.
Prior to 2012, Ford has not paid any dividend from 2006 to 2011 according to the company’s Dividend History page.
However, Ford did pay dividends regularly between 2000 and 2006 on a quarterly basis according to the same Dividend History page.
As of now, Ford has suspended its dividend payouts since March 2020 due largely to the COVID-19 disruption.
Here is an excerpt extracted from Ford’s 2020 annual filings regarding its latest dividend policy:
We are not sure how long the dividend suspension will last and when Ford will resume its dividend payout again.
But one thing is for sure, Ford’s automotive sales have recovered tremendously in 3Q and 4Q 2020, respectively.
The recovery in Ford’s automotive segment has almost reached the pre-pandemic level in both of these quarters, driven mainly by strong demand for large and medium-size trucks and SUVs.
Additionally, Ford’s stock price has hit an all-time high of $12 dollar per share at the time this article was published.
Things are looking hopeful and if the recovery can continue at this pace, Ford will likely reinstate its dividend payments as early as in 2Q 2021.
While Ford may have not been a dividend-paying stock consecutively for 3 quarters in 2020, it’s still worth taking a look at its financials to see how well the company has been doing in terms of profitability and cash flow generation, especially during the age of the COVID-19.
Keep in mind that these 2 metrics are what ultimately determine whether Ford will resume its cash dividends in the near future or not.
Let’s dive in!
Ford’s Trailing Dividend Yield
* Dividends are calculated on a trailing 12-month (TTM) basis. The dividend yield is measured based on Ford’s ex-dividend date and it includes all Ford’s special dividends.
Let’s first look at Ford Motor’s historical dividend yield as shown in the chart above for the period from 2015 to Feb 2021.
Historically, Ford’s dividend yield hovered around 6% on average for the last 6 years.
During the onset of the COVID-19 pandemic which occurred in 1Q 2020, 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 around 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 as low as 2% by the end of 2020.
The plummeting dividend yield was attributed partly to the recovery in Ford’s stock price and also the declining dividend rate as Ford has totally cut the dividend payout down to zero in subsequent quarters in 2020.
As of Feb 2021, Ford’s dividend yield plunged to 0% when the TTM dividend rate declined to $0.
For your information, it has been more than 1 year or consecutively 4 quarters since Ford last paid a dividend, thereby leading to a $0 TTM dividend rate.
Ford’s Dividend History – Quarterly
The chart above shows Ford’s cash dividend payments history on a quarterly basis for the period from 2015 to 2020.
On average, Ford’s quarterly dividend totaled around $0.15 per share.
You may notice that Ford’s quarterly dividend shot up significantly beyond $0.15 per share in the 1st quarter of 2016, 2017 and 2018.
These were the special dividends that Ford has paid during those periods in addition to the regular quarterly dividend payments.
Unfortunately, Ford has stopped paying special dividends starting in 2019 and has totally suspended the cash dividend indefinitely since 2020 Q2.
Ford’s Dividend History – TTM
On a trailing 12-month or TTM basis, Ford’s dividend rate totaled as much as $0.85 per share in 2016, the highest in the last 5 years.
The TTM dividend rate has since declined steadily and reached only $0.15 in 2020 4Q.
Since Ford has stopped the dividend payment for more than 1 year or 4 consecutive quarters, its TTM dividend rate is now down to $0 as reflected in the Q1 2021 quarter.
Understandably, this zero dividend rate has also translated to a zero dividend yield in 1Q 2021 as seen in the prior dividend yield chart.
Ford’s Cash Paid On Dividends – Quarterly
The chart above shows the cash paid on Ford’s common stock dividends for the period from 2015 to 2020 on a quarterly basis.
As we all know, dividends are literally paid out of cash or free cash flow in particular.
Therefore, the cash flow part is one of the most important metrics that dividend investors should pay attention to.
According to the chart above, Ford paid about $600 million in cash on dividends on average per quarter in the last 6 years.
The cash paid on dividends soared significantly to more than $1 billion in some quarters when Ford announced special cash dividends in these periods.
In short, Ford Motor Company’s cash outflow for dividend payments totaled more than half a billion dollars every quarter since 2015.
For perspective, we are talking about a combined figure of more than $2 billion per year.
That’s a huge amount of money that Ford has been returning to shareholders continuously every year since 2015.
Ford’s Cash Paid On Dividends – TTM
The chart above shows the cash paid on dividends on a TTM basis.
From a TTM perspective, Ford paid more than $2 billion in cash for dividends to common stock shareholders.
Additionally, Ford’s cash outflow for dividend payments totaled as much as $3 billion in some quarters.
These are the special dividends that Ford declared and paid in those periods.
Since Ford has suspended its dividend payout in Q2 2020, the TTM cash paid has been declining as seen in the chart.
The cash paid on dividends dropped to a little over $500 million as of 2020 Q4 and was totally out in 2021 Q1, indicating that Ford has suspended its dividends for more than a year.
On a long-term basis, Ford’s TTM cash paid on dividends has been declining between 2015 and 2020, showing that Ford may have been facing a tough business environment all these years.
Ford’s Earnings Per Share (EPS) – TTM
To get a glimpse of how well Ford has been doing in terms of profitability, we will dive into the company’s earnings per share as plotted in the chart above.
In the last 6 years, Ford’s EPS has been plummeting and reached negative numbers throughout 2020, suggesting that the company’s profitability has plummeted as well.
Take note that the year 2020 was probably the worst period for Ford’s business, attributed primarily to COVID-19 disruption which has negatively affected the company’s automotive sector.
Keep in mind that the EPS will have a big impact on Ford’s ability to pay and possibly increase the cash dividends now and in the future.
The lower the EPS, the less likely the company will increase the payout, due mainly to the higher dividend to earnings payout ratio which we will look at in the next discussion.
Ford’s Earnings Payout Ratio – TTM
The earnings payout ratio is an important dividend metric that measures whether Ford can afford to pay cash dividends with respect to profits.
The earnings payout ratio is calculated using the following equation:
Ford’s earnings payout ratio = TTM Dividends Per Share / TTM EPS
In line with Ford’s deteriorating EPS as seen in the prior EPS chart, it makes sense to see a rising earnings payout ratio in the current chart.
In the last 6 years, Ford’s earnings payout ratio has been steadily rising and reached beyond 100% in 2019, illustrating that the dividend per share amount has exceeded that of the earnings per share in the same year.
Due to the negative EPS in 2020, Ford’s earnings payout ratio has capped at 0% as it is meaningless to have a negative payout ratio.
Ford’s Free Cash Flow – TTM
The free cash flow is another important metric that dividend investors need to pay particular attention to.
As mentioned, dividends are paid literally out of cash. A company that fails to generate free cash flow will most likely be unable to pay any dividends.
As such, the free cash flow metric determines how much wiggle room Ford has in terms of dividend payment with respect to free cash flow.
Of course, the higher the free cash flow that Ford generates, the more likely the company can afford to pay and even increase the cash dividends.
Free cash flow equation:
Ford’s free cash flow = Operating cash flow – Capital Spending
Based on the current chart, Ford’s free cash flow is almost like the total opposite of the EPS chart.
Over the last 6 years, Ford’s free cash flow has been on a roll, averaging around $10 billion on a TTM basis.
Particularly, Ford’s free cash flow soared to a new high even during the age of the COVID-19, reaching as much as $18 billion as of 2020 4Q.
While Ford’s earnings per share may have plunged, its free cash flow has been totally a different story.
Keep in mind that Ford paid only $2 billion in cash as dividend payments on a TTM basis.
Therefore, that leaves Ford with plenty of cash around for dividend payments.
To give you an idea, we are talking about a free cash flow earnings payout ratio of 20% if Ford managed to generate an average of $10 billion in free cash flow on a TTM basis.
Ford’s Free Cash Flow Payout Ratio – TTM
The chart above shows Ford’s dividend to free cash flow payout ratio for the period from 2015 to 2020.
Since Ford generated about $10 billion in free cash flow and paid about $2 billion in cash as dividends, it comes as no surprise to see a FCF payout ratio that hovered around 20%-30% in most quarters.
While Ford may have been a cash cow in 2020, it has suspended the cash dividend indefinitely, causing the FCF payout ratio to decline and reached 0% as of 2021 Q1.
The plummeting FCF payout ratio was also partly attributed to the rising free cash flow in 2020.
In short, Ford has the ability to generate enough free cash flow to cover the cash dividends as reflected in the low FCF payout ratio in the past.
Ford Motor Company can afford to pay the cash dividends even during the age of the COVID-19 due to the soaring free cash flow.
Ford’s Annual Dividend
* chart includes all special dividends.
The chart above shows Ford’s yearly 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 2012 and has continued to do so until 2020.
While Ford has been continuously paying cash dividends, the company has suspended the dividends in 2020, cutting the payout to only $0.15 in the same year.
On a yearly basis, we can see that the dividend amount has increased significantly, particularly in the early years.
Dividends started to level off between 2016 and 2019, due possibly to the challenging business environment.
The COVID-19 pandemic has only accelerated the dividend cut, causing Ford to make a tough decision on dividend suspension to preserve liquidity.
Ford’s Annual Dividend Growth Rates
The chart above shows Ford’s dividend annual growth rates for the period from 2012 to 2020.
Ford’s yearly dividend grew the most in the early years from 2012 to 2016, with most periods reporting double-digit growth rates.
However, the growth rates started to plunge from 2017 and onward, with 2020 reporting the worst growth rate at -75%.
While Ford has suspended the dividend payments for the rest of 2020, the company will most likely resume its cash dividend in 2021, judging from the strong free cash flow the company has reported in 2020.
Ford’s free cash flow in 4Q 2020 has even exceeded that of its pre-pandemic level, driven primarily by pent-up demand for its automotive products in the age of the COVID-19.
While Ford’s free cash flow has grown stronger, its profitability has plunged, with EPS dropping to its lowest level and turned negative in Q4 2020.
However, this situation may not matter much for Ford as its free cash flow has been able to sufficiently cover the cash paid on dividends multiple times, indicating what a cash cow Ford has been all these years.
In short, Ford can afford to pay a dividend moving forward and will most likely be a dividend payer again as early as in 2021 2Q.
References and Credits
1. All Ford’s financial figures in the charts on this webpage were obtained and referenced from the quarterly and annual filings between 2015 and 2020 which can be found in the following websites: Ford Financials and Filings.
2. Some numbers are the author’s own calculation.
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