The most critical component of a dividend payout is profitability. As long as the company has adequate profits, which are preferably growing, dividend payouts are a useful tool to reward shareholders for their investments into the company. But what happens when the profits are declining? That is exactly what is happening with automobile major Ford (F).
Founded in 1903 by the legendary Henry Ford, Ford is a leading global automaker producing passenger vehicles, SUVs, trucks, electric vehicles (under its Model e initiative), commercial vans and services (through Ford Pro), and financing solutions (via Ford Credit). Ford revolutionized manufacturing with the moving assembly line and has remained in family control for over a century.
Valued at a market cap of $46.7 billion, F stock is up 19.4% on a year-to-date (YTD) basis, while offering a dividend yield of 6.35%.
However, the company’s market cap has more than halved from its all-time high levels of around $100 billion in January 2022, while it is also down from its $55 billion market cap in August 2015. But can it stage a turnaround? I think it can, and here’s why.
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Ford’s showing in the fast-growing and highly competitive electric vehicle (EV) market has been underwhelming, with its EV division projected to record a $5 billion loss this year. Flagship electric offerings like the Mustang Mach-E and the F-150 Lightning, once seen as central to Ford’s transition away from gasoline models, have experienced slower sales than anticipated.
Yet, to turn things around and cut losses, Ford is rolling out several strategic measures. A major step includes nearly $2 billion in upgrades to the Louisville Assembly Plant to build a new mid-size electric pickup. This project is part of a broader $5 billion push to improve efficiency and strengthen competitiveness. The plan involves setting up a battery manufacturing facility to lower production costs and refining manufacturing processes to drive down expenses.
Meanwhile, numbers for the latest quarter have also…
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