Automakers Ford and GM Navigate Tariffs with Buybacks, Dividends

Analysis: Automakers Ford and GM face challenges but maintain shareholder returns through dividends and buybacks. Investors remain cautious amid tariff concerns.

Date: 01-05-2025

AI Rating: 7

**Investment Analysis of Ford and GM**

The automotive industry is facing significant challenges, particularly for legacy automakers like Ford Motor Company (NYSE: F) and General Motors (NYSE: GM). The report highlights various risk factors that investors should scrutinize; nonetheless, it also points to reasons for optimism in the short term.

**General Motors** is currently focused on returning value to shareholders, revealing plans for a new $6 billion share buyback program and a recent 25% increase in its quarterly dividend. The commitment to buy back shares at a price-to-earnings ratio of 7 times indicates a strong belief in the company’s long-term value, despite the potential impact of tariffs that threaten profitability. Moreover, the CFO has reassured shareholders of ongoing share repurchases and a continued reduction in outstanding shares.

This trend of share buybacks could positively impact earnings per share (EPS) by reducing the share count, thus potentially increasing the value of existing shares. Due to General Motors' strategic emphasis on return on equity (ROE), supported by these buybacks, investors can view this action as a tactical maneuver to leverage the market environment favorably.

**Ford Motor Company** is also navigating these challenging waters by offering a competitive dividend yield of 7.4%, alongside supplemental dividends to reward shareholders. The company’s dividend payout ratio of under 41% indicates that it has enough buffer to maintain and possibly raise dividends in the future. However, potential tariff impacts and economic slowdowns could weigh heavily on Ford's stock performance in the short term, stalling dividend growth and financial returns.

**Considerations for Investors**: While the automotive sector is plagued by uncertainty from tariff threats and geopolitical tensions, the steadfast commitment from both GM and Ford to return capital to shareholders through dividends and share buybacks instills a layer of confidence. Investors might prepare for volatility but could be reassured by the companies' actions to reward shareholders.

Stocks: F GM