Following Tuesday's upgrade from Jefferies that lifted Ford Motor Co (NYSE: F) shares about 5%, investors may be rushing into the stock in hopes of it hitting the analysts' price targets.
But what about its dividend yield? How many shares would one need to yield a steady $500 per month in dividends?
The Ford Analyst: Jefferies analyst Philippe Houchois upgraded Ford from Hold to Buy, upping the price target from $13 to $16 in light of last week's investor event.
Houchois's optimism stemmed from Ford's ambitious plans, including its aim to achieve a 10% margin by 2026 - a significant contrast with a consensus stuck below 6%. He also applauded Ford's new reporting structure, which splits the numbers into Blue, Model e and Pro divisions, promoting better tracking and accountability.
As of now, Ford has a dividend yield of 4.73%. But what does that mean for investors hoping to reap $500 monthly in dividends?
To determine how much Ford stock an investor would need to own to yield $500 per month in dividends, we can start by calculating the annual dividend income required: $500 x 12 months = $6,000.
Next, divide the amount by the 4.73 % dividend yield: $6000 / 0.0473
This means that an investor would need to own approximately $126,849.89 worth of Ford stock, or 10,060 shares, to generate a monthly dividend income of $500.
And, if the stock goes to $16 like Houchois forecasted, that means investors owning 10,060 shares would also gain $33,801.60 from the increased stock value, representing a 26.58% growth on the trade, in addition to the monthly dividend yield.
Note that dividend yield can change on a rolling basis, as the dividend payment and the stock price both fluctuate over time.
The dividend yield is calculated by dividing the annual dividend payment by the current stock price. As the stock price changes, the dividend yield will also change.
For example, if a stock pays an annual dividend of $2 and its current price is $50, its dividend yield would be 4%. However, if the stock price increases to $60, the dividend yield would decrease to 3.33% ($2/$60).
Conversely, if the stock price decreases to $40, the dividend yield would increase to 5% ($2/$40).
Further, the dividend payment itself can also change over time, which can also impact the dividend yield. If a company increases its dividend payment, the dividend yield will increase even if the stock price remains the same. Similarly, if a company decreases its dividend payment, the dividend yield will decrease.