Valued at $40.6 billion, Ford Motor (F) is one of the most well-known names in the automotive industry. Ford has also attracted income investors, with a forward dividend yield of 5.9%, excluding special dividends. This is significantly higher than the consumer discretionary sector average of 1.9%.
However, like all legacy automakers, Ford faces challenges from emerging competitors, volatile economic conditions, and a constantly evolving automotive industry. So far this year, the stock is up 3.2%, while the S&P 500 Index ($SPX) is down 1.7%. Let’s find out if this dividend-paying stock is worth buying right now.
The Bull Case for Ford: High Dividend Yield and Smart Strategies
Ford remains a major player in the global automotive industry, selling millions of vehicles each year under its various brands, including Ford, Lincoln, and F-Series trucks. While Ford has occasionally paused dividends during economic downturns, its strong balance sheet and growing profitability indicate continued dividend payouts for shareholders. Furthermore, its low forward payout ratio (which measures how much money the company pays out in dividends) of 37.2% suggests that there is plenty of room for dividend increases.
The company generates significant cash flow, which supports its dividend payments. In 2024, the company generated $6.7 billion in adjusted free cash flows. Management expects adjusted FCF of $3.5 billion to $4.5 billion for full-year 2025 and intends to return 40% to 50% of FCF to shareholders. The company declared a first-quarter 2025 dividend of $0.15 per share, as well as a supplemental dividend of $0.15 per share. Ford has also taken several steps to improve manufacturing efficiency, including increasing the use of artificial intelligence (AI) and data analytics for cost savings and quality control. The company saved $500 million in costs in the second half of 2024 and intends to save more in 2025, including $1 billion in product design savings. This should allow the company to save money while still paying dividends.
In 2024, Ford’s revenue increased by 5% year-over-year to $185 billion, marking the company’s fourth consecutive year of revenue growth. Net income increased 37.2% to $5.9 billion. Ford continues to dominate the pickup truck market, with the F-Series remaining America’s best-selling truck and overall best seller. Management stated that the Ford Ranger, the company’s flagship global franchise, was named North America Truck of the Year for the fifth year in a row. Ford’s commercial division, Ford Pro, has experienced significant growth in software and service subscriptions. Pro software subscriptions increased 27% to nearly 650,000, resulting in a 15% increase in revenue in 2024.
During the Q4 earnings call, CEO Jim Farley emphasized Ford’s transition to a recurring revenue model, which strengthens long-term customer relationships beyond the initial sale. Ford’s electric vehicle (EV) division is expanding, but the company faces stiff competition from Tesla (TSLA), General Motors (GM), Rivian (RIVN), and other automakers. The EV market is expanding, but pricing pressures and increased competition are posing challenges for Ford. As a result, Ford’s EV vehicles, which it reports as the Ford Model e Segment, saw a 35% drop in revenue in 2024, with an operating loss of $5 billion.
While Ford remains committed to EVs, it is adapting its strategy to market realities. The company is working on next-generation affordable EVs with a focus on small and medium-sized trucks and SUVs that are ideal for daily commuting and can use smaller, less expensive batteries. Farley also acknowledged current market and policy uncertainties, such as President Donald Trump’s tariffs on imports from Canada, Mexico, and China. Ford is closely monitoring global trade developments and working with policymakers to protect its business interests. The company ended the year with $22.9 billion in cash and cash equivalents.
Is Ford Stock a Buy on Wall Street?
On Wall Street, Ford stock is rated a “Hold.” Of the 22 analysts, four rate it a “Strong Buy,” 13 rate it a “Hold,” one rates it a “Moderate Sell,” and four rate it a “Strong Sell.” Ford’s stock has surpassed the average analyst target price of $9.95. However, its high target price of $15.50 implies that the stock could rise as much as 51% from current levels.
The Verdict on Ford Stock
Investment in Ford stock is not without risk, as the company’s EV division remains unprofitable. However, its legacy strength, commitment to EVs, and undervaluation make it an appealing investment at current prices. Finally, Ford stock strikes a balance between value, dividends, and future growth in the EV space.
