Ford Motor Company (NYSE:F) Passed Our Checks, Will Pay US$0.15 Dividend Soon | Daily News Byte

Ford Motor Company (NYSE:F) is about to go ex-dividend in the next 4 days. Usually, the ex-dividend date is one business day before the record date which is the date on which the company determines the shareholders who are eligible to receive the dividend. The ex-dividend date is important because the settlement process involves two full business days. So if you miss that date, you won’t appear on the company’s books on the recording date. Accordingly, Ford Motor investors who purchased stock on or after November 14th will not receive the dividend, which will be paid on December 1st.

The company’s upcoming dividend is US$0.15 per share, following the last 12 months, when the company distributed a total of US$0.60 per share to shareholders. Calculating last year’s payouts shows that Ford Motor has a trailing yield of 4.4% at the current share price of $13.72. Dividends are an important source of income to many shareholders, but the health of the business is essential to maintaining dividends. As a result, readers should always check whether Ford Motor has been able to grow its dividends, or whether the dividend may be cut.

Check out our latest review for Ford Motor

Dividends are usually paid out of the company’s earnings, so if a company pays out more than it earns, its dividend is often at a higher risk of being cut. Ford Motor paid out just 20% of its earnings last year, which we think is conservatively low and leaves plenty of margin for contingencies. That said, even highly profitable companies may not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the past year it paid out 69% of its free cash flow as dividends, within the typical range for most companies.

It is reassuring to see that the dividend is covered by both profit and cash flow. This generally suggests that the dividend is sustainable, as long as earnings do not decline rapidly.

Click here to see the company’s payout ratio, along with analyst estimates of its future dividends.

Have earnings and dividends grown?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, because it’s easier to raise the dividend when earnings are rising. If profits fall enough, the company will be forced to cut its dividend. Fortunately for readers, Ford Motor’s earnings per share have been growing at 14% a year for the past five years. Ford Motor has an average payout ratio that suggests a balance between growing profits and rewarding shareholders. Given the rapid growth rate of earnings per share and current payout level, there may be a possibility of further dividend increases in the future.

Another important way to gauge a company’s dividend prospects is by measuring its historical dividend growth rate. Since our data began, 10 years ago, Ford Motor has raised its dividend by about 12% a year on average. It’s great to see earnings per share grow rapidly over several years, and dividends per share grow right along with it.

The Bottom Line

Has Ford Motor got what it takes to maintain its dividend payments? Earnings per share have grown at a good rate in recent times and over the past year, Ford Motor has paid out less than half of its earnings and slightly more than half of its free cash flow. Ford Motor looks solid in this review overall, and we’ll definitely consider investigating it more closely.

Because of this, while Ford Motor has an attractive dividend, it’s worth being aware of the risks involved in this stock. For example, we find 2 warnings for Ford Motor (1 can’t be ignored!) that deserves your attention before investing in the shares.

If you’re in the market for a strong dividend payer, we recommend reviews our selection of top dividend stocks.

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This Simply Wall St article is general. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take into account your goals, or your financial situation. We aim to bring you long-term focused analysis driven by primary data. Note that our review may not factor in the company’s latest price-sensitive or material quality announcements. Simply Wall St has no position in any of the stocks mentioned.