Shares of Ford (NYSE: F) are down 38% this yr because the market considers the deteriorating fundamentals on the automotive firm.
In October, U.S. gross sales plummeted 10%.
However the true drawback is free money circulation. This yr, free money circulation is predicted to be half of what it was in 2020. And subsequent yr, it’ll be half of this yr’s. In reality, the 2023 determine is projected to be the worst in a decade.
For these preserving rating at dwelling, that’s dangerous. Very dangerous.
The excellent news is that Ford will pay for its dividend.
This yr, Ford is forecast to pay $1.9 billion in dividends, nicely under the $7.7 billion in free money circulation anticipated for this yr and even the $3.7 billion anticipated for subsequent yr.
However Ford slammed the brakes on its dividend in 2020. After paying a dividend each quarter since 2012, administration eradicated the dividend for six quarters beginning in 2020.
That historical past of abolishing the dividend means administration received’t hesitate to do it once more if instances get robust.
Mix a doubtlessly trigger-happy administration with quickly depleting free money circulation, and you’ve got a dividend that would very nicely be dealing with a lower within the subsequent yr or so.
The corporate’s funds and declining money circulation point out the dividend will not be protected in any respect.
Dividend Security Ranking: D
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