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Ford Suspension Of Dividend Levels The Battlefield For Tesla

On Friday, Ford Stock closed at 2012 level ($4.30), after the company announced suspension of its dividend and withdrew its 2020 guidance.

Ford also said it would draw $15.4 billion from two credit lines. The company said that it plans to borrow $13.4 billion under its corporate credit facility and an additional $2 billion under its supplemental credit facility.

How Does This Benefits Tesla?

“Like we did in the Great Recession, Ford is managing through the coronavirus crisis in a way that safeguards our business, our workforce, our customers and our dealers during this vital period,” Ford CEO Jim Hackett said in a statement. “As America’s largest producer of vehicles and largest employer of autoworkers, we plan to emerge from this crisis as a stronger company that can be an engine for the recovery of the economy moving forward.”

CNBC reports that Separately, Ford and its U.S. dealers are offering customers a variety of services, including six months of payment relief for some new car buyers, the company said in a statement. Ford will pay for three months and customers can defer for up to three more for a total of six months, the company said. The program is only for people purchasing 2019 and 2020 model-year vehicles, excluding 2020 Super Duty trucks.

Dividends mean you don’t have to sell shares to realize a return. Although bonds and CDs are more traditional income investments, a stock that pays a dividend also generates income for investors.

Tesla investors don’t invest based on dividend because Tesla don’t pay it. Tesla investors on the other hand, are investing in Tesla based on the future of the company, on the ability of Tesla CEO to make a great impact in the world and help humans transition from dirty ICE cars to clean autonomous electric vehicles.

Dividends are also attractive for investors looking to generate income. However, a decrease or increase in dividend distributions can affect the price of a security. The stock prices of companies that have a long-standing history of dividend payouts would be negatively affected if they reduced their dividend distributions. Conversely, companies that increased their dividend payouts or companies that instituted a new dividend policy would likely see appreciation in their stocks.

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