Ford and UPS Face Dividend Cuts Amid Uncertain Outlook

Investors eye a 7.1% yield from Ford and 6.5% from UPS, but looming risks of dividend cuts due to poor earnings guidance cast a shadow. Determining the better long-term investment amid tightening conditions will be crucial.

Date: 18-05-2025

AI Rating: 5

**Dividend Cuts at Risk for UPS and Ford**: The report raises significant concerns about both Ford and UPS potentially cutting their dividends due to unsustainable payout ratios and deteriorating earnings outlooks. The ability of both companies to maintain dividend payouts is under scrutiny.

Free Cash Flow (FCF): The analysis indicates that Ford has a projected FCF between $3.5 billion to $4.5 billion while planning to pay out about 40% to 50% of FCF in dividends. Meanwhile, UPS is expected to pay out approximately 96% of its cash dividend, spotlighting significant risks associated with sustaining dividend levels. Both companies' ability to maintain dividends amidst high payout ratios suggests potential liquidity issues, raising red flags for investors.

Current Trends in Earnings: Currently, both companies are facing adverse trading conditions. UPS management noted a decline in average daily volumes (ADV), projecting a 9% decrease. Ford has suspended its guidance due to supply chain challenges and tariff uncertainties, highlighting an exacerbated earnings risk. Such developments may negatively impact investor sentiment and stock valuations.

Strategic Outlooks**: Ford's transition towards electric vehicles (EVs) presents long-term potential, but with an alarming reported loss of $5.1 billion in its EV segment, the path to profitability appears fraught with challenges. UPS, conversely, is positioning its service offerings towards higher-margin sectors, which could provide opportunities for revenue growth despite current headwinds.

**Profits vs. Dividends**: The overarching concern for professional investors remains the sustainability of dividends amidst varying earnings performance. For Ford and UPS, the inclination of management to redirect capital expenditure towards stability and growth rather than dividends could mean adjustments to stock attractiveness, depending on the company’s ability to navigate current challenges.

Stocks: F UPS