Ford Motor Company (NYSE: F) has paid quarterly dividends since 2012. The board of directors resumed payments after a hiatus since 2006 when the company’s financial troubles mounted due to slumping sales and a large debt burden.
Hence, it’s important to ensure Ford can continue making payouts. Once you’ve done that, you can see how many shares you need to own if you’re targeting $1,000 in annual dividends.
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Dividend-paying ability
Ford has a 6.2% dividend yield, much higher than the S&P 500 index’s 1.3%. While that sounds enticing, high yields could signal the company may slash the payout.
After all, Ford’s shares have dropped more than 22% in the last year through March 6, indicating some investor consternation. The S&P 500 gained over 12% during this time frame.
One way to see if a company can continue paying dividends is to look at its free cash flow (FCF). Ford generated FCF of $6.7 billion, and it paid dividends of $3.1 billion.
On this basis, it appears the company has plenty of cushion to continue payments.
Calculating the shares
Ford currently pays a $0.15 per share quarterly dividend, or $0.60 annually. It has kept that level constant since 2023.
To receive $1,000 in dividends, you’d have to own 1,667 shares. That’s the $1,000 divided by the $0.60 per share annual dividend. With the stock at $9.90 as of Mar. 7, that will cost about $16,500.
The company paid special dividends in 2023 and 2024 of $0.65 and $0.18 per share, respectively. However, since you can’t predict those payouts, the calculation focuses on the regular, current dividend. If the board of directors sees fit to declare special dividends, you’ll receive a higher annual amount, of course.
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Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.