All rights reserved. Charles St, Baltimore, MD But that is not all. Ford cut the dividend to zero. So there is no buffer for F stock. When is the earliest that Ford might consider restoring the dividend? That will stabilize the stock. You might recall that I wrote several articles here over the past six months arguing that Ford could not afford its dividend. In one article in DecemberI pointed out that the high dividend yield was a sign that the market agreed with me. Obviously I did not know the coronavirus impact would force Ford to cut the dividend.
But I also suspect Ford may not completely restore the prior dividend per share.
In addition, the cash flow from operations CFFO margin was 7. So even if capex was cut to 5.
They would likely wait until there was a margin of safety. In the last four years, F stock has traded an average dividend yield of 7. Therefore, taking the lower dividend per share of 48 cents and dividing it by 7. And if you use a more normalized dividend yield of 5. The reason I ran these numbers is because the stock market always anticipates the future. We have used a conservative estimate for the future.
I have written several articles about this already. Look for Ford to restore the dividend sometime in the next three quarters or so, but at a reduced rate. We have used a sufficient margin of safety in our methodology. Log in. Log out. About Us Our Analysts. Sponsored Headlines. More from InvestorPlace.
Stocks to Buy Trump vs. Subscriber Sign in Username. Sign in. Having trouble logging in?All rights reserved. Charles St, Baltimore, MD I argued that the dividend will return to 15 cents per quarter once Ford can afford it again.
I expect that the increase in cash flow sometime in will be sufficient to cover the dividend. Therefore, 60 cents per share divided by 7. Analysts 19 polled by Yahoo! Finance estimate that Ford will make 51 cents per share in Seeking Alpha has a poll of 19 analysts who estimate earnings will be 59 cents per share. That is almost equal to the cent dividend from the past. So, yes, Ford should be to afford the dividend sometime in Ford will report its Q2 earnings on Thursday. This is already discounted in the stock price.
What is important is what lies ahead. Ford was hoarding its cash, cut its dividend, and is hunkered down. It has not yet provided any forecast for At one point, it had no factories open. The company recently upgraded its extremely popular F truck with a lot of new features. This is the first big upgrade in the truck in the past five years. Some of the features are an all-new power train, a hybrid gasoline-electric version, an on-board generator, miles per tank, a inch screen, a fully flat seat, over-the-air updates and tailgate productivity gadgets.
So far, the company does not have a fully electric F Ford claims it will have one within the next 24 months, but it may have to move faster than that. Even if Ford were to cut its dividend by one-third to, say, 40 cents per share once it resumes, the stock would likely rise. Therefore the implied value of a 5.
That is calculated by dividing 40 cents by 5. Moreover, if the annual dividend stays at 60 cents and the average yield is 7. Therefore, looking forward, despite the lack of a dividend, Ford stock looks like a good bargain. Log in. Log out. About Us Our Analysts. Sponsored Headlines. More from InvestorPlace.All rights reserved. Charles St, Baltimore, MD The novel coronavirus has battered many industrial companies. F stock hit its lowest level since back in March, as made sense when it seemed like the nation might be slipping into another financial crisis.
Since then, however, the stock market has roared back. Yet Ford continues to lag behind. Just look at the Dow Jones Industrial Averagefor example.
Its managers just decided to boot out three long-running members of the index — venerable respected names — so the likes of Salesforce. Real manufacturing companies are out of favor, and Ford certainly is among the cast-offs. F stock has been in an extended downtrend for years now. Some of this the blame falls on macroeconomic factors. From the peak, sales dropped byunits to With hindsight, it seems the auto market — driven by incentives and cheap credit — got a bit overheated a few years ago and the industry paid the price in recent years.
However, Ford has to shoulder some responsibility, as its slide has been worse than the industry as a whole. Fortunately, for shareholders, change is coming. Farley will have the chance to steer Ford in a new direction, particularly as the company has a number of promising vehicle launches including several Bronco models over the next year.
The company suspended its dividend earlier this year, removing what was formerly a large yield. That punished the folks who owned F stock for income, and made it much less appealing to wait while Ford turns itself around. The new CEO is a plus, but it will probably be a few months until we see anything significant from new leadership that could move the stock.
And meanwhile, the economy is still a mess. Most analysts assumed the housing market would be dead this spring as the unemployment rate soared and the economy shut down.
Instead, housing has absolutely roared back, and many housing sector stocks are now hitting new all-time highs. The economy has held up better than could have been reasonably expected, all else equal. If another big round of aid arrives — as seems fairly likely — it could lead to a big upturn in the auto market as well. Right now, Ford is the precise opposite of what a hot stock looks like.
F stock has been in a slump for years. The company is dominant in its market, yet has struggled to generate consistent operational traction recently.
Generally, whenever the market gets into a technology craze — such as in the late s and late s — it soon passes. Eventually the likes of Tesla, Nio, and the other EV makers will have to turn a profit and start paying dividends to please their shareholders. Meanwhile Ford still has a tremendous base.All rights reserved. Charles St, Baltimore, MD Even though F stock has no dividend right now, the company will likely restore it soon.
The new F remains on schedule to start production and go on sale this fall. Moreover, the company restarted its production plants on May Ford announced much stronger Q1 financials than I expected on April For example, the company generated just slightly negative cash flow from operations CFFO for the quarter. Depending on whether working capital is positive, that would bring FCF negative at a similar level.
But I believe that starting in Q3 the positive free cash flow will return. Moreover, Ford has plenty of cash to weather this short-term storm. This allows the company to outlast a potentially slow pick up in demand for its trucks. At this point, I believe the company may be able to afford that level of dividend cost to its shareholders. Ford has been paying the same quarterly dividend of 15 cents per for share for the past five years, up until this past March. However, I believe the company will keep on paying the same amount when it restarts its quarterly dividends.
What is likely to happen, then, is that as it becomes clearer that the dividend will be paid, the stock will rise. This will have the effect of lowering the dividend yield, in anticipation of the upcoming dividend payment.
So the question becomes, what dividend yield will F stock rise to? Seeking Alpha has a table for every stock that shows the average dividend yield for the past four years. For Ford, the average yield has been 7. Therefore, taking the 60 cents per share annual dividend rate and dividing it by 7. I think you should.The coronavirus pandemic has crashed the global economywith companies involved in transportation hit the hardest.
Fast-forward to today, and With signs that some parts of the economy are opening up including some of Ford's plants and strong demand for its most-profitable vehiclesit's looking likely that the company will indeed come through the worst of the crisis and emerge, if not stronger, than strong enough to profit from the eventual economic recovery once we beat COVID So let's take a look a little further into the future?
What might Ford look like in five years? More importantly, what would that mean for investors who own -- or buy -- Ford shares today? Needless to say, when Ford management made the decision a number of years back to maintain a massive amount of cash on the balance sheet, they weren't foreseeing anything like the coronavirus pandemic.
InFord's then-CFO said the company wanted its balance sheet to be strong enough to support the dividend through anything but the worst recession. As a result, the company will have more than sufficient cash to get to the end of under current conditions.
Even as demand for other passenger vehicles has remained weak, surging demand for pickups and SUVs is great news for the company. Ford has already restarted some North American factorieshiring additional workers to account for increased absenteeism resulting from enhanced safety practices. The company's plants in China have been reopened for weeks now. Now is the time for Ford to transition from almost zero revenue to generating cash flows from these operations.
It won't come close to being enough to offset all of its cash burn from fixed expenses like paying interest on its debt, but it's a start toward what will hopefully be a steady increase in sales as things return to some semblance of normal. The coronavirus lockdown has allowed plenty of companies to realize the potential benefits of remote work, and several big tech companies have already said they plan to allow more employees to work remotely in the future.
Not only could this cut expenses for employers, but it could also increase the pool of potential employees to include people who have the skills, but are not interested in relocating. It could also prove a boon for workers who could save money by eliminating the daily commute, allowing them the freedom to live virtually anywhere.
It could also further juice the prospects for ridesharing and autonomous vehicles; less need for a daily commuter vehicle could mean more people forego car ownership entirely. That's created uncertainty for Ford and other automakers.
This is where I think a healthy dose of reality is important. The fact is, remote work isn't a new concept; other companies, notably Yahoo! Sure, the proliferation of new tools will make working from home -- or a neighborhood coffee shop -- easier and more productive. But count me among those who don't expect we will look back at the coronavirus pandemic as being the birthplace of some mass remote work movement. Most people simply aren't wired to work in essentially isolation, and long-term, human nature trumps technology.
Not to mention that far fewer jobs are conducive to this kind of work than I expect most people realize. My expectation is that where Ford and other automakers will be impacted from technology is via the growth of autonomous driving and more wide-scale car sharing.
The implications for individual car ownership are far larger than work-from-home. Expectations aside, global transportation is going only grow in the future, and Ford is investing where the demand will be.
Between developing rideshare and autonomous platforms, Ford is taking steps to make sure it participates in this part of the future of automobiles. The company is also likely to be a leader in auto electrification and other alternative energy drivetrains as more car buyers look to move away from fossil fuels. I also expect that management will continue to prioritize a fortress-like balance sheet.During large events or special matches, they usually offer special promotions to their players.
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Ford’s Dividend Could Return By Year-End If the Downturn Peaks Soon
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Ford Stock Is Worth $8.29 Based on Its Potential Dividend
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