Dead-Weight Dividend Stocks: Ford (F)
Why It’s Dead Weight: Lower profits incoming
More of the same could prove to be a very good year for the company, and the current trajectory is a compelling one … particularly if Trump can truly put the U.S. economy in higher gear and more money in people’s pockets.
Investors may not want to put the cart too far in front of the horse, however. Any impact Trump may have could take months if not years to reach full speed. A big chunk of the Trump plan calls for Ford and its peers to keep production here at home, where it costs more. That eats into earnings. Profit margins are already a narrow 4.7%, and even-thinner margins won’t exactly give the carmaker a major motivation to share more of the wealth with shareholders.
That’s not to say the current quarterly dividend of 15 cents per share is in jeopardy. It is to say, though, the recent rise in the value of F shares (up 11% since the election) could be tough to justify in the foreseeable future. Remember, even Ford itself warned in September that its 2017 profits would roll in lower than 2016’s, as bigger-picture demand continues to deteriorate. Not that much has changed for the better in the meantime.