Ford’s 6% Dividend Under Threat as New Tariffs Pressure Cash Flow

Ford Motor Company (NYSE: F) is facing mounting pressure on its 6% dividend yield, with a reduction increasingly likely due to the impact of new U.S. import tariffs and weakening profitability projections.

DETROIT, March 25 (Reuters) - Ford Motor (NYSE:F) is facing increasing pressure to reduce its 6 percent dividend yield as new U.S. import tariffs and weakening profitability projections threaten the company’s ability to sustain its payouts.

The automaker, which has maintained a 15-cent quarterly dividend since mid-2022, may be forced to trim dividends as its free cash flow shrinks significantly this year.

Stability of Ford’s dividend is being challenged by its deteriorating cash flow outlook. The company paid out $3.1 billion in dividends last year, supported by $5.9 billion in net income.

However, Ford projects its 2025 free cash flow will fall to $3.5 billion-$4.5 billion, a significant drop from $6.7 billion in the prior year. This reduced FCF, largely driven by the Trump administration’s tariffs on Canadian and Mexican imports, threatens the company’s ability to sustain its current dividend.

With production costs increasing due to 25 percent import tariffs and additional steel and aluminum duties, Ford’s margin compression could force a payout cut.

The new tariffs, which took effect in early March, are adding pressure to Ford’s cost structure. Higher expenses on imported materials could erode already thinning margins, leaving fewer resources to fund dividends.

If the tariffs remain in place or expand, further shrinking Ford’s FCF, a dividend reduction becomes more probable.

At present, Ford’s 6 percent yield is higher than General Motors' (NYSE:GM) 1 percent yield but is nearing the level of Stellantis (NYSE:STLA), which recently halved its dividend amid cash flow concerns.

Stellantis' decision to distribute more cash than its FCF could support has drawn criticism, something Ford may also have to consider to remain competitive.

To preserve cash, Ford is also slowing its electric vehicle investments. With weaker-than-expected EV demand, the company is pausing some of its planned expansions.

This move could free up capital for dividends but carries risks. Reducing its EV focus may leave Ford lagging as the industry pivots toward electrification.

Despite the challenges, Ford’s stock has shown some resilience, rising 1 percent year-to-date, outpacing the broader S&P 500.

Analysts polled by Refinitiv anticipate the company will likely reduce its quarterly dividend to 12 cents per share in the coming quarter, reflecting its shrinking FCF.

In addition to dividends, Ford is returning cash to shareholders through stock buybacks, having spent $426 million last year.

However, with shrinking cash flow, the combination of dividends and buybacks could soon exceed Ford’s FCF capacity, further straining its financial position.

Overall, Ford’s dividend payout is increasingly at risk as tariffs weigh on profitability and cash flow. Whether the company opts for a modest cut or a larger reduction will depend on the full scope of tariff impacts and its ability to manage costs moving forward.

Reporting by Ben Brody in New York; Editing by Bill Troc