Detroit automakers can run but they can't hide from the potentially devastating impacts tariffs could have on their business. The stocks have been hammered all year long, some worse than others, and the true impact is yet to be felt.
Amid the slew of analyst downgrades and lowered price targets there's a reality that is setting in for some investors: Tariffs could cause Ford Motor Company (F 3.03%) to alter how it returns value to shareholders. In other words, Ford may be forced to cut its coveted dividend.
Lucrative dividend
Ford has no doubt faced its share of challenges lately. The company is working to cut costs at the same time it's attempting to improve quality issues that have dinged the company's bottom-line through warranty costs. It has challenges in a tough Chinese market, and it's also burning through billions of dollars churning out each electric vehicle at a loss currently.
Throw in the potential impact of tariffs and it's not farfetched to think that Ford may have to cut its lucrative dividend, which remains one of the largest reasons to own the stock. Ford's current dividend yield sits at a lofty 7.8% due to the stock's sell-off, and trades at a paltry price-to-earnings ratio of 5.8.
NYSE: F
Key Data Points
"It is time to confront some hard truths, once more: vehicle tariffs have commenced, and parts tariffs are likely to follow within a month," wrote Bernstein analyst Daniel Roeska, according to Barron's. "We extend our company analysis to Ford and find significant downside not priced by the market yet."
He could be exactly right when it comes to the downside not being priced into Ford stock yet. As you can see in the graph below, likely thanks to having more production capacity located in the U.S., Ford's stock has shed less value than its competitors so far in 2025.
The good news is that Ford shouldn't have to cut the dividend right away, as the company has ample liquidity to wait and see if the tariff drama ends in the near term, one way or another. In fact, you can see in the graph below that Ford has steadily improved its cash position and can easily cover the dividend.
F Cash and Equivalents (Annual) data by YCharts
How costly could it be?
The pain from the tariffs won't be completely felt through the 25% tariff on imported vehicles, but rather next month when another 25% tariff is expected to be slapped on imported automotive parts. For example, Ford produces about 82% of its U.S. sales domestically, but only about a third of its cars are built using domestic parts.
The cost could end up being significant. J.P. Morgan analyst Ryan Brinkman wrote in a note to investors that the current tariff proposals could cost Ford around $6 billion -- rival General Motors fared worse with his estimated cost reaching around $14 billion.
If there's anything to take away from this assessment, it's just how serious these tariffs could be. Not only could they affect Ford's bottom line, but if the tariff pain is extended long-term it could jeopardize the company's lucrative dividend.
With that said, if the dividend is a core part of why you're considering owning shares of Ford, understand that it will always be a focus for the company. Even if it is temporarily cut to mitigate tariff costs, it will one day reach its full potential again as management is committed to returning value to shareholders in that manner.
