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Ford’s traditional dividend yield is above 4%, but the automaker also offers supplemental dividends in some years.
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Special dividends can be lucrative, like Ford’s 2023 special dividend of $0.65 per share.
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Partly due to a supplier fire, among other developments, Ford’s cash flow will be affected in the short term.
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Dividend stocks are a great tool for investors to build long-term wealth in the market. Reinvesting these dividends uses the power of compounding to help build even more wealth over time. Ford Motor Company‘s (NYSE: F) The dividend is praised for its yield that currently exceeds 4%, as well as the company’s constant supplemental dividends that it often distributes as a bonus payment to investors.
Let’s take a look at a recent example of why these supplemental dividends are powerful and why they could be in danger in the near term.
A great example of how lucrative these supplemental dividend payments can be came in 2023. Ford had originally invested in a young electric vehicle manufacturer. rivianwith plans for the two to collaborate on a shared platform.
Later, the plans were finally scrapped and each automaker went its own way. When Ford sold its stake in Rivian, it significantly boosted the company’s cash flow, which it distributed through its dividend. Remember that Ford aims to return between 40% and 50% of its free cash flow to investors through the dividend. That scenario led Ford to distribute a significant special dividend of $0.65 per share in 2023, in addition to its regular quarterly dividend payment of $0.15 per share.
In more recent years, Ford’s annual supplemental dividend has been roughly an additional quarterly payment, give or take a few cents. It’s a nice boost on top of an already valuable dividend yield. Unfortunately, due to some unforeseen circumstances, Ford’s supplemental dividend could be in jeopardy this year.
Ford is dealing with a couple of external factors weighing on its finances. In fact, Ford previously noted that while its underlying business was performing at the high end of previous guidance, it was incurring a net tariff headwind of $1 billion, as well as an additional $1 billion headwind between 2025 and 2026 due to the fire at supplier Novelis.
Ultimately, while Ford has distributed a supplemental dividend for three consecutive years, the company’s slowing cash flows will likely end that streak. In fact, Ford recently announced a massive shift away from electric vehicles that will cost the company a $19.5 billion charge with $5.5 billion in cash incurred over the next two years.