Ford’s Sky-High Dividends: A Smokescreen for Looming Financial Troubles

Ford Motor Company has long been a favorite among income-seeking investors thanks to its generous dividend payouts. Right now, its dividend yield is sitting at a very attractive 6.01%, a number that naturally grabs attention. But there’s a catch. While the company is handing out strong dividends, its underlying business struggles with weak growth, profitability concerns, and an uncertain future.

For investors, this raises a crucial question: Can Ford continue to afford these dividends, or is trouble on the horizon?

A Look at the Numbers: Profitability on Shaky Ground

In its latest earnings report, Ford posted a third-quarter operating profit of $2.6 billion, which was in line with analyst expectations. However, the company lowered its full-year outlook, warning of a weaker fourth quarter, with profit projections slipping to $1.9 billion—down from an expected $2.4 billion. This kind of downward revision is never a good sign, and it didn’t go unnoticed by Wall Street.

Adding to the bad news, S&P Global Ratings recently downgraded Ford’s debt outlook from “stable” to “negative,” citing higher costs, slower-than-expected savings, and pricing pressures. The concern? If Ford’s profit margins keep getting squeezed, it might not be able to sustain its current level of dividend payouts.

Ford’s EV Struggles: Big Ambitions, Bigger Losses

Ford has been pushing hard into the electric vehicle (EV) market, trying to compete with Tesla and other players. But so far, the road has been anything but smooth.

In 2024, Ford’s EV division, Model e, lost over $5 billion, and revenue in the segment fell by 35%. That’s a huge red flag. Looking ahead, Ford expects more losses in 2025, estimating that its EV business could bleed another $5 billion to $5.5 billion.

To make matters worse, the company paused production of its all-electric F-150 Lightning for six weeks, citing weak demand. It’s a clear sign that Ford is struggling to find buyers for its EVs, despite massive investments in the space.

Will Ford’s Dividend Survive?

A high dividend is great—until it isn’t sustainable.

Investment analysts are starting to worry about Ford’s ability to maintain its dividend in the long run. Morgan Stanley’s Adam Jonas recently downgraded Ford’s stock, citing concerns that the company may be forced to cut its dividend to protect its cash flow.

This wouldn’t be the first time Ford adjusted its payouts. In 2020, during the COVID-19 pandemic, it suspended its dividend entirely—a move that rattled investors. It was later reinstated, but at a lower rate. Could history repeat itself? If profits continue to shrink, Ford may have no choice but to scale back dividends again.

Investors Are Losing Confidence

Ford’s stock performance isn’t inspiring much confidence either.

After the company revised its outlook, its stock dropped sharply, marking its worst one-day decline since late 2024. Over the past year, Ford shares have fallen 22%, while the S&P 500 gained 23% in the same period. That’s a major underperformance.

Even Wall Street analysts are hesitant. Right now, only 33% of analysts rate Ford as a “Buy,” compared to 55% for the average S&P 500 stock. Clearly, the market is worried about Ford’s future.

What’s Next for Ford?

To try and turn things around, Ford is making some big moves:

• It recently secured a $9.6 billion loan from the U.S. Energy Department to help fund EV battery plants in Kentucky and Tennessee. While this investment aligns with the push toward clean energy, it’s also a massive upfront cost.

• The company is in the middle of an $11 billion restructuring plan, which includes cutting costs and reducing its workforce to boost profitability.

These changes could help in the long run, but for now, the road ahead looks bumpy.

Final Thoughts

Ford’s dividend may look like a great deal on paper, but investors need to look deeper. Weak profits, EV struggles, and a declining stock price all raise serious concerns about how long Ford can keep up its generous payouts.

If the company can’t fix its growth and profitability issues soon, it may have to make some tough choices—and that could mean cutting dividends.

For investors, the message is clear: Don’t get blinded by the high yield—pay attention to Ford’s financial health.