In trading on Monday, shares of Ford Motor were yielding above the 5% mark based on its quarterly dividend (annualized to $0.6), with the stock changing hands as low as $11.98 on the day. Dividends play a crucial role for investors as they have historically contributed significantly to the stock market's total return.
For instance, let's consider the scenario of purchasing shares of the S&P 500 ETF (SPY) on 12/31/1999 at $146.88 per share. By 12/31/2012, the value per share had decreased to $142.41, resulting in a loss of $4.67 per share. However, during the same period, dividends totaling $25.98 per share were collected, leading to a positive total return of 23.36%. Even with dividends reinvested, the average annual total return was approximately 1.6%. Therefore, a yield exceeding 5% can be deemed attractive if sustainable.
Ford Motor holds a position as an S&P 500 company, indicating its status as one of the large-cap companies within the S&P 500 Index. It is essential to note that dividend amounts are not always predictable and are influenced by the profitability fluctuations of each company. By examining the historical chart for Ford Motor, investors can assess the likelihood of the current dividend continuing and determine if a 5% annual yield is a reasonable expectation.
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