It is the holiday season. While it is good to give gifts, sometimes it is nice to receive an extra gift. If memory serves us right, I know a certain somebody who is about to give us 2 presents in January next year. I want a pony and a sports car. Wait, dividends are paid in cash. Then I want cash and more cash.
Who wants an extra special dividend payment? I know I do. Special buy, 5 dividend payments for the price of 4. Sometimes, getting an extra dividend payment can be nice. Who am I kidding, it is always nice to get more money back.
Last year, Ford (F) started to pay a special dividend payment in January. However, they did not raise their normal dividend. They did this so could reduce the risk of having a possible dividend cut in the future. The special dividend gives them the ability to raise and lower their dividend payment as profits increase and decrease. Being that they are a cyclical company and not a steady business, this makes sense.
The company says it wants to give about 40%-50% of its earnings in dividends. Looking at CNBC, it looks like they will earn about $1.82 for 2016. Since they are already paying $0.60 per year, my SWAG (Scientific Wild Ass Guess) is about a 22 cent special dividend.
Update: The Ford (F) special dividend came in at $0.05. We were wrong by a little bit.
So, in January 2017, we can get 15 and 22 cent dividends, equaling 37 cents per share. At my buy price of $12.42, we will get back about 3% of our money in about 1 month on the ex-dividend date. If only I could earn 3% every month, then I would be rich already.
The Future and Valuation
With the future, there is some risk. A big one coming from self-driving cars and ride sharing. A lot of companies are investing in these areas. This creates the risk that the number of cars being sold will go down. With a PE of 6.1 and a 4.9% normal dividend yield, I think the market is pricing this risk in. But, there can be a benefit to this. I predict that self-driving cars will cost more money. They will need a lot of sensors. They will be fuel-efficient to save money in fuel, including electric and hybrid models. Since the vehicle will need to be able to hold a bunch of people, small cars will decrease and big cars will increase as a percentage of vehicles sold, like vans and SUV’s. So, while the number of vehicles sold will go down, the profit per vehicle can go up. Will this be an overall positive or negative? I think it will take years to find out.
Ford (F) designs, manufactures and sells automobiles such as cars, truck, and SUVs. They sell all over the world, including places like the US, Europe, Africa, Asia, and South America. They have about 200,000 employees. Their headquarters in Dearborn, Michigan and Henry Ford founded them in 1903.
What I bought
On 12/28/16, we bought 100 even share of ford for $1,241.50, including those pickup sized commissions. This will add another $60 a year in regular dividends, plus a bonus special dividend a year. That is enough to give me a few free tanks of gas per year. Good thing my hybrid is fuel-efficient. You can read more stock purchases here.
What do you think of F? Is the special Dividend worth it? Please feel free to share your thoughts in the comment section below.
Disclosure: We own shares of F