Impact of Tariffs Raises Concerns for Ford Motor Company Investors
Detroit automakers face significant challenges as the potential ramifications of tariffs loom. Stocks in this sector have struggled throughout the year, with varying degrees of decline, and the full effect of tariffs has yet to be realized.
As analysts continue to downgrade ratings and lower price targets, a stark reality emerges for investors: tariffs may force Ford Motor Company (NYSE: F) to rethink its shareholder value strategy. This could mean a cut to its highly valued dividend.
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Challenges Facing Ford’s Dividend
Ford has encountered numerous obstacles recently. The automaker strives to reduce costs while resolving quality issues that have affected its profitability through rising warranty expenses. Additionally, Ford faces difficulties in the competitive Chinese market and is currently incurring significant losses with electric vehicle production.
The potential for severe tariff impacts raises concerns about Ford’s ability to maintain its generous dividend—a key incentive for many shareholders. Currently, Ford’s dividend yield is an attractive 7.8% due to the significant drop in the stock price, while its price-to-earnings (P/E) ratio stands low at 5.8.
“It is time to confront some hard truths, once more: vehicle tariffs have commenced, and parts tariffs are likely to follow within a month,” noted Bernstein analyst Daniel Roeska in a report referenced by Barron’s. He warned of a significant downside risk for Ford not yet reflected in the market.
Roeska’s assessment may be accurate; Ford’s stock has depreciated less than that of its competitors so far in 2025, likely due to its stronger U.S. production capacity.
TSLA data by YCharts
On a positive note, Ford appears to have sufficient liquidity to navigate the immediate future, allowing the company to monitor the tariff situation before making drastic measures regarding the dividend. As shown in the following graph, Ford has been improving its cash reserves, indicating it can manage the current dividend obligations.
F Cash and Equivalents (Annual) data by YCharts
Tariff Costs and Their Implications
Ford’s challenges concerning tariffs extend beyond the initial 25% tax on imported vehicles. A further 25% tariff on imported automotive parts is anticipated next month. While Ford manufactures approximately 82% of its U.S. sales domestically, only a third of its vehicles utilize domestic parts.
The financial repercussions could be considerable. J.P. Morgan analyst Ryan Brinkman estimates that current tariff proposals could cost Ford around $6 billion. In comparison, rival General Motors may face a steeper hit, with estimated losses reaching $14 billion.
This underscores the severity of potential tariff impacts. If the situation persists long-term, it could jeopardize Ford’s ability to keep its profitable dividend intact.
Nevertheless, for investors focused on Ford’s dividend, it’s critical to understand that the company continues to prioritize shareholder returns. Should there be a temporary cut to the dividend due to tariff pressures, Ford’s management remains committed to restoring it to its full potential in the future.
Evaluating a $1,000 Investment in Ford Motor Company
Before considering an investment in Ford Motor Company, take this into account:
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Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends General Motors and Stellantis. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
