In the automotive sector, companies like Ford Motor Company (NYSE:F) were once viewed as the ultimate growth plays. As the middle class grew, so would car sales, and investors only needed to buy a small piece of Ford to enjoy the long-term growth benefits.
Of course, as we found out with the most recent recession, even the largest auto makers have been served their fair share of comeuppance, teetering on the edge of bankruptcy until only recently.
Questions of whether we have hit peak auto sales are also prevalent of late, and the ability for companies like Ford to easily switch to electric vehicle options in a sustainable long-term fashion remain.
These drivers are important considerations when we consider the viability of Ford's current dividend yield of approximately 6.5%.
While other car companies have been first to the EV party, companies like Ford certainly have the ability to show up late and still perform.
In the longer term, all things are possible, and Ford's management team appears to be attuned to the future and doing what is necessary for Ford to survive and thrive in the long run.
In the short run, Ford has more than $25 billion in cash outside of its investment unit, with the vast majority in the U.S., and approximately $11 billion available on credit lines.
With a dividend distribution of approximately $2.4 billion quarterly, this dividend should be safe for the short term, based on current cash flow generation, assuming nothing cataclysmic takes place in the next five years.
Invest wisely, my friends.
