Ford Motor Company investors face a major intersection
From Volkswagen gaming U.S. emissions tests to Tesla (ticker: TSLA) fighting to stay afloat, the world's automakers have made enough trouble for themselves these past few years that they don't need help from the grease monkeys in government.
That's why many in Detroit are looking on in disbelief, as the American auto industry – not exactly known for grand-prix performance since the Great Recession – is coming to grips with the fallout of the Trump administration's recent round of trade tariffs.
On Friday, China implemented a 25 percent duty on U.S.-produced cars in retaliation for $34 billion in U.S. tariffs on Chinese goods. And as those levies take hold, Ford Motor Company (F) is bracing to hit a rather rude pothole. It shipped roughly 80,000 vehicles to China last year and may find itself absorbing the new Chinese tariffs to keep its market position secure.
How all of this will impact Ford's dividend is tough to say at best. At a quarterly rate of 15 cents per share, it's held steady since 2015. But if you go back just a few years before that, F dividends didn't exist at all.
"If an investor is looking for reliable dividend income, they certainly can find better sources than Ford," says Bob Johnson, principal at the Fed Policy Investment Research Group, in Charlottesville, Virginia.
Ford did not pay any dividends from mid-2006 through 2011.
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"It resumed paying dividends in 2012, and while the dividend steadily rose from 2012 through 2015, it has remained at the same level since 2015," Johnson says. "While the forward annual dividend yield stands at 5.15 percent, income investors should not count on that dividend continuing unabated into the future."
Relying on steady dividend payments from automobile manufacturers, Johnson concludes, "is fool's gold."
Otherwise, things look pretty good for Ford in the U.S., despite whatever's going on half a world away. Following robust sales for U.S. automakers overall in May, "Ford Motor's F-Series is still crushing it with an 11.3 percent growth in sales compared to last year," says Christopher Ma, director of the George Investments Institute at Stetson University in DeLand, Florida.
In May, Ford sold 84,639 pickups, "the best May F-Series sales performance in 18 years," Ma says. "Since 2015, Ford also aggressively invested in the new F-150 truck, which has delivered multiple new sales records in 2017 and 2018 in its truck, utility and commercial vehicle lines. Ford is also moving away from low-margin passengers cars."
In terms of automobile lineups, the F-150 is to Ford what butter is to bread – and the very embodiment the all-American, muscular pickup truck. It's no stretch to forecast that whatever hurt Ford suffers from China tariffs, it will gain with "made in America" PR to win over more hearts and wallets in rural areas.
In the urban confines of Wall Street, analysts hold generally positive opinions on Ford – though trade gyrations from Washington certainly haven't helped matters.
Just a few weeks ago, you couldn't find any bearish forecasts by way of Nasdaq's analyst stock recommendations. But now, two analysts have called Ford an "underperform" and "sell" respectively. Still, three label it a "strong buy" and one a "buy" – with a majority of seven analysts calling Ford a "hold."
In the long term, and away from the glare of the recent headlines, buying Ford stock has amounted to going nowhere fast for some investors. Assuming you bought shares in August 2003 and held them, just like your Uncle Warren in Omaha says you should, you'd be no better off today. Ford over that period has driven in one humongous circle, from $10.71 to about $11 per share.
Then again, you've got to be feeling pretty revved up if you bought Ford during the Great Recession, when the U.S. auto industry looked pretty shaky. At its current price, Ford trades at more than four times what it did in January 2009.
In terms of the dividend picture, here's what that means: If you invested $10,000 in Ford in July 2008, that money with all dividends reinvested would be worth about $32,600 today. Granted, this required nerves of steel, in an auto plant or otherwise, to make that call then.
Speaking of steely resolve, Ford declared at the recession's height that it would not take a government bailout through the Troubled Asset Relief Program – and did so with brio, running commercials to that effect. Yet away from the spin machine, Ford Credit quietly accepted funds from the related Term Asset-Backed Securities Loan Facility, and $5.9 billion in government loans to retool its manufacturing plants.
For whatever updating Ford did then, the years since have unveiled more surprises than a repair bill from your friendly, yacht-owning mechanic. Much of the industry talk today centers on self-driving cars and electric vehicles, not exactly the stuff of F-150 dreams.
"Automotive stocks are facing a tough period as the future of personal transportation is difficult to predict," says Karl Brauer, executive publisher of Autotrader and Kelley Blue Book and based in Irvine, California.
Today's Ford will not be tomorrow's – what with the industry at large changing all around it.
"The first 100 years of this industry was based on families buying or leasing multiple gasoline-powered vehicles and keeping them for a period of years before replacing them with a new model," Brauer says. "Now younger buyers are waiting longer to buy cars or avoiding a car purchase altogether through car sharing services like Uber."
Of if you prefer, Ford's fate will boil down in part to a tale of pickups versus ride shares.
"Every company is racing to keep up," Brauer says, "but nobody knows exactly how transportation will look in five to 10 years – and that's holding back a lot of traditional automotive stock values."
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