Ford Motor (NYSE: F) is offering one of the strongest dividend yields in the stock market. The automotive company has recently announced a quarterly dividend of $0.15 per share, yielding around 6.5%. The company has the potential to sustain dividend yield despite strong market competition.
Their cash generation potential along with new business strategies are likely to offer room for more dividend increases in the coming years. Ford Motor stock price is also trading at attractive valuations. The shares appear undervalued considering the price to earnings ratio of 7.47 compared to the industry average of 22 times. Its price to book ratio of 1 is down from the industry average of 3 times.
Ford Motor Dividends are Safe
Ford’s dividends are safe. This is because of the steady growth in financial numbers despite challenges in certain markets. The company generated EBIT of $1.8B in the latest quarter compared to the past year mark of $1.7B. The EBIT growth looks strong considering a decline in its market share and losses from South America, Europe, MEA and China.
Its market share declined to 6% in the previous quarter, down from 6.3% in the year-ago period. Despite market share loss, Ford has reported a growth in cash flows – which bodes well for its strategy of investments in growth opportunities and dividend sustainability. Its GAAP operating cash flow grew 8% year-to-date while adjusted free cash flow rose 80%.
Ford is Planning to Make Big Changes
The company is seeking to reduce its cost structure combined with the introduction of a new product line in the coming days. The company will also reduce its exposure towards few regions; it is targeting U.S., European and Chinese markets.
“Our Global Redesign is about making choices to transform our organization, to become the world’s most trusted company and a clear leader in an era of rapid change,” said Jim Hackett, Ford president, and chief executive officer. “We are getting stronger today and we have more work to do.”