This High-Yield Dividend Stock Faces a $2 Billion Tariff Hit, But Its Payouts Look Safe for Now
Now, Ford is bringing back some optimism by reinstating its full-year outlook, just after reporting a 5% jump in second-quarter sales that outpaced Wall Street's expectations. Adjusted earnings per share for the quarter came in at $0.37, which comfortably beat consensus estimates of $0.33 by 11.1%. Still, Ford now faces a real $2 billion tariff impact, directly accounted for in its latest guidance.
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Despite the headwinds, the company's quarterly dividend yield of 6.93% still holds serious appeal for income investors, and the reinstated guidance - with tariff impacts baked in - should reassure anxious shareholders for now. Is it time for dividend investors to dive back into Ford?
Ford's Financial Resilience
Ford Motor (F), one of Detroit's 'Big Three' automakers, has built its reputation on making vehicles for everyday drivers while starting to focus more on electric and smart tech options. The stock has been a long-term laggard on the charts, which means that the income generated from Ford's dividend is one of its key selling points for investors.
Digging into Ford's valuation, the forward price-to-earnings ratio of 9.68x is far below the sector average - which means the stock looks cheap, but also accounts for lower growth expectations.
Second-quarter results highlighted both strengths and rough spots. Revenue set a record of $50.2 billion, but a net loss of $36 million, tied to special items, offset some of that progress. At the same time, adjusted EBIT came in at $2.1 billion after an $800 million tariff hit, while operating cash flow of $6.3 billion and adjusted free cash flow of $2.8 billion help show Ford's financial base is solid.
The Engines of Ford's Sustainable Payout
Ford's push for a smarter, more capital-efficient business can be seen in its newest supply chain overhaul in South America. By partnering with RELEX Solutions, Ford aims to improve dealer service levels, automate planning, and cut inventory costs across five South American countries. The adoption of AI-driven planning goes beyond buzzwords at this point; it's a move that can enhance purchasing, streamline demand forecasting, and boost operational efficiency.
Stateside, Ford's growing presence in the electric vehicle (EV) space is getting support through joint efforts like ChargeScape, which just inked a deal with PSEG Long Island. The program taps into AI to optimize the charging of over 2,200 Ford EVs, rewarding drivers for helping regulate grid demand. This use of tech and collaboration demonstrates Ford's bid to stay competitive as the transition to EVs accelerates.
These building blocks support the company's ability to keep up its generous dividend payout. Ford's forward payout ratio sits at 42.87%, bolstered by a solid 6.93% annual dividend yield, far outpacing the consumer discretionary average of 1.89%.
Analyst Sentiment and What Lies Ahead for Ford
Along with an expected $2 billion net impact from tariffs, the automaker's reinstated guidance for 2025 includes adjusted EBIT between $6.5 billion and $7.5 billion, and adjusted free cash flow of $3.5 billion to $4.5 billion.
Over on Wall Street, opinions are mixed. After earnings, Federico Merendi at Bank of America reiterated a 'Buy' rating and Street-high $14 price target, while Dan Levy of Barclays backed a 'Hold' rating and an $11 target, saying Ford is doing well operationally but still faces big-picture risks and possible recall expenses.
Looking at all 24 analysts in coverage, the consensus is 'Hold,' and the shares are trading roughly flat with their average 12-month price target - suggesting that analysts aren't expecting a breakout from this stock anytime soon.
Conclusion
Despite a $2 billion tariff cloud and earnings pressure, Ford is showing it knows how to drive through rough patches. With new tech partnerships shoring up its fundamentals and management signaling confidence by reinstating guidance, the company's dividend, while not entirely out of the woods, looks well-supported for now. Shares may be treading water, and analysts remain cautious, but Ford's high yield continues to stand out in the sector. For income seekers, Ford's latest moves suggest its payouts are holding up better than the headlines might suggest.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
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