As an observer of the auto industry, I’ve noticed a curious financial situation at Ford Motor Company. So far this year, the company has paid out about four times more in cash dividends to its shareholders than it has reported in earnings per share. While Ford appears determined to avoid cutting its dividend, this generous payout raises questions about its long-term sustainability, especially as President Trump’s tariff policies continue to hammer its profits.
Table of Contents
Ford is on track to pay dividends of 75 cents a share this year, which is nearly as much as the average analyst earnings estimate of 78 cents a share. This comes after the company announced in July that tariffs would cut about \$2 billion from this year’s pretax earnings.
📊 The Rationale and the Risks
Maintaining a high dividend can be a smart move. I see it as a signal of confidence in the company’s long-term prospects, which helps support the share price and appeals to income-focused investors who appreciate the stock’s 5.2% yield. Ford has also shown it’s willing to suspend the dividend in times of crisis, as it did during the 2008 financial crisis and the 2020 pandemic.
However, there’s a cost to this generosity. Hesitating to cut the dividend means there is less cash available to reinvest in the business or pay down debt. This is particularly relevant given Ford’s dual-class share structure, where Ford family members hold Class B shares with 40% of the voting rights and received \$55 million in dividend payments last year.
💰 A Look at ‘Adjusted Free Cash Flow’
To justify its high payouts, Ford steers investors to a non-standard metric it calls “adjusted free cash flow.” A more cynical take might call it “cash flow before bad stuff”. To calculate this number, Ford starts with its automotive cash flow from operations, subtracts capital expenditures, and then makes several adjustments.
For instance, this year Ford has excluded hundreds of millions in cash restructuring costs, severance payments, and pension contributions—items that have been excluded every quarter since 2019. It also adds back cash inflows like distributions from its Ford Credit segment. While some adjustments are defensible, others, like unspecified “other” cash outflows, make it impossible for me as an investor to fully parse the numbers.
Even using Ford’s own metric, the numbers look tight. The company paid out \$1.8 billion in dividends in the first half of 2025, significantly more than the \$1.3 billion in adjusted free cash flow it generated during the same period. While Ford may well decide to maintain its dividend, it’s clear that it is stretching to do so.
More Topics
- The Future of AI – Why the Brain is a Better Model Than Microchips
- A Guide to Trump’s ‘Everyone Inside’ Homelessness Strategy
- Robert Mulligan – A Look Back at Hollywood’s Last Poetic Filmmaker
- Fashion Trends – A Guide to the Return of the ’90s Bandanna
- A Guide to the Broken U.S. Child-Care System and How to Fix It
- Job Skills – A Guide to Certificates (and Why Many Don’t Pay Off)
- A Political Guide – How European Leaders Are Learning to Speak Trump’s Language
