Income Investors Should Know That Ford Motor Company (NYSE:F) Goes Ex-Dividend Soon (2024)

It looks like Ford Motor Company (NYSE:F) is about to go ex-dividend in the next four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Ford Motor investors that purchase the stock on or after the 7th of August will not receive the dividend, which will be paid on the 3rd of September.

The company's upcoming dividend is US$0.15 a share, following on from the last 12 months, when the company distributed a total of US$0.78 per share to shareholders. Based on the last year's worth of payments, Ford Motor stock has a trailing yield of around 7.3% on the current share price of US$10.69. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Ford Motor

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Ford Motor paid out 62% of its earnings to investors last year, a normal payout level for most businesses. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Luckily it paid out just 10% of its free cash flow last year.

It's positive to see that Ford Motor's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That explains why we're not overly excited about Ford Motor's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Ford Motor has lifted its dividend by approximately 6.9% a year on average.

The Bottom Line

Is Ford Motor worth buying for its dividend? It's unfortunate that earnings per share have not grown, and we'd note that Ford Motor is paying out lower percentage of its cashflow than its profit, but overall the dividend looks well covered by earnings. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

On that note, you'll want to research what risks Ford Motor is facing. To that end, you should learn about the 3 warning signs we've spotted with Ford Motor (including 1 which is potentially serious).

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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