Ford’s Dividend History
Amid turbulence in 2020 due to the pandemic, Ford lifted and suspended its dividend swiftly. Come 2021, the automaker resumed a quarterly payout. For General Motors, the dividend return was slightly delayed, reinstated in August 2022. Ford raised its quarterly dividend by 50% in July 2022 to reflect a stable trend. Despite no increase since the pre-2020 pause, Ford’s dividend performance should be contextualized within the cyclical automotive industry and the EV adaptation.
The Automotive Industry Is Going Through a Churn
The shift to electric cars is restructuring the automotive industry, but the pace has slackened, particularly in the U.S. Ford, focusing on hybrid models alongside EV production, encountered substantial losses in their EV business. Stock prices reflect the sector’s turbulence with Ford down a touch in contrast to GM’s nearly 29% rise this year.
Legacy Automakers Are Generating Healthy Free Cash Flows
Despite industry flux, legacy automakers remain robust, with GM and Ford highlighting substantial free cash flows. GM’s share repurchase initiative underscores its strong financial standing, planning another $6 billion buyback soon. Ford’s shareholder policy to return 40%-50% of free cash flow continues to skew towards the upper limit, promising ample distribution potential.
Ford’s Dividend Payout Policy
Ford’s expected surplus cash from free cash flow forecasts raises the speculative question of another special dividend versus a buyback like GM’s. Despite contrasting stock performance, GM’s strategic share repurchases notably impacted company stock benefits.
Should Ford Announce a Share Buyback Program Like General Motors?
GM’s stellar stock growth post-its significant share repurchases underscores the power of this financial strategy. Ford, contemplating a potential share buyback, faces the dilemma of tapping into its cash reserves or reducing its regular dividend. Balancing liquidity and shareholder interests, Ford could blend cash reserves and excess funds for a potential stock buyback, aligning with GM’s successful playbook.
