After slashing its annual dividend from $0.60 per share in 2019 to $0.15 per share in 2020 and then again to $0.10% in 2021, Ford Motor Company (F +4.40%) has hit the gas pedal in the past couple of years, hiking the payout higher. While the stock offers an enticing forward-yielding dividend of 4.8%, income investors are likely a little cautious about driving Ford stock into their portfolios considering the recent inconsistency in the payout.
It's certainly a valid point to wonder if the company is jeopardizing its financial security to placate shareholders, so let's take a closer look at how much Ford plans on paying out in dividends in 2024 to better assess the company's financial health.
NYSE: F
Key Data Points
Strong free cash flow is helping fuel the higher dividend
With approximately 4 billion shares outstanding, and assuming it returns a dividend of $0.78 per share in 2024 -- based on the special cash dividend of $0.18 per share it paid in Q1 as well as four quarterly payments of $0.15 per share -- Ford will pay out about $3.12 billion in dividends this year. For context, Ford paid out $5 billion in dividends in 2023 and $2 billion in 2022.
An important way to gauge Ford's 2024 distributions is through the lens of its cash flow. Management stated on its first-quarter 2024 conference call that it projects 2024 adjusted free cash flow of $6.5 billion to $7.5 billion, and is targeting consistently returning 40% to 50% of adjusted free cash flow to investors in the form of dividends.
Is now the time to go for a ride with Ford?
Taking a judicious approach to its dividend, Ford seems uninterested in sacrificing its financial well-being to lure investors in with a high dividend, tying it to free cash flow. Should this strategy change, it will warrant further investigation, but for now, income investors should certainly keep Ford on their radars as a potential route to generating stronger passive income.
