Ford Motor Co. (NYSE: F) has one of the highest yields among S&P 500 stocks, at 7.5%, which is staggeringly high. It is only at that level because the stock has taken such a beating and dropped so far. With business catastrophes in the future and a broken electric vehicle (EV) model, Ford cannot afford the payout.
24/7 Wall St. Key Points:
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Ford Motor Co. (NYSE: F) has one of the highest yields among S&P 500 stocks.
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With the challenges the automaker faces, that payout is unsustainable.
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Ford’s stock has dropped 17% in the past year, while the S&P 500 is up 11% in the same period. Just a few weeks ago, the decline was closer to 25%. The sell-off is primarily because Ford said it would lose $5.0 billion to $5.5 billion on its EV business this year. In the first quarter of the year, it sold only 22,550 EVs in the United States, 250 a day nationwide. Its overall sales for the period were 501,292. EV sales were just above 4% of that total.
Even though Ford makes a relatively high percentage of its cars and gets a high rate of parts from U.S. operations, tariffs will bite the bottom line. Goldman Sachs recently lowered its Ford rating. The analyst wrote, “We downgrade Ford to Neutral from Buy to better reflect a more difficult cyclical dynamic including competition internationally, weaker consumer demand, and what we expect will be higher costs from tariffs.”
Of the 26 analysts who follow Ford, 17 rate it as a Hold, and four rate it as Underperform or Sell. Most of these analysts worry about EV sales and that a small percentage of its sales are overseas. In particular, this has become and will be a problem in China, the world’s largest car and EV market, as local companies there eat up market share.
Ford has terrible labor union problems. Its deal with the UAW is expected to cost $8.8 billion annually between this year and 2028. At one point, during the labor negotiations, Ford CEO Jim Farley said that the costs of the labor deal “were unsustainable and would put Ford at risk of bankruptcy.”
Ford also warns that there is a significant risk if Chinese EVs enter the U.S. market. Today, tariffs are blocking that move. After visiting China and looking at its EVs, Farley told board member John Thornton, “John, this is an existential threat.”
Ford has admitted it may have a grim future. It needs to improve its cash position to weather a storm it may not be able to weather. Farley needs Ford to be less generous with inventors.
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