Ford is considering a special dividend in 2025 or a stock buyback following GM's lead.

From Nasdaq: 2024-06-25 21:04:41

Shares of legacy automakers like Ford and GM have seen a slump in recent years, but investors have enjoyed dividends. Ford paid a special dividend of 65 cents in 2023 and 18 cents earlier this year. With a nearly 5% dividend yield, will Ford announce another special dividend in 2025?

Ford’s dividend history has seen ups and downs, with a suspension in 2020 due to the pandemic. The dividend was reinstated in 2021 at 10 cents per share, growing to 15 cents in July 2022. Despite not increasing dividends for nearly a decade, Ford’s stability is notable in the cyclical automotive industry.

As the automotive industry transitions to electric vehicles, Ford and GM are adapting. Despite slower-than-expected EV sales, Ford is focusing on hybrids and expects to launch hybrid models. Ford’s EV segment reported a pre-tax loss of $4.7 billion in 2023, with projected losses of $5-$5.5 billion in 2024.

Legacy automakers like GM and Ford are generating healthy free cash flows used to reward shareholders. GM expects $8.5-$10.5 billion in free cash flow, prompting a $6 billion share buyback. Ford aims to distribute 40%-50% of free cash flows to shareholders, raising questions of a potential share repurchase.

With GM’s successful share repurchase program, Ford may consider a similar strategy to boost stock performance. GM stock has gained 66% since announcing a $10 billion share repurchase plan, while Ford has seen an 18% increase. Ford might tap into its $25 billion cash reserve for a share buyback to increase shareholder value.



Read more at Nasdaq: Will Ford Pay Another Special Dividend in 2025, or Follow GM With a Stock Buyback?