Does Ford Have Preferred Stock?

If you've ever wondered whether Ford Motor Company, one of the most iconic American automotive brands, offers preferred stock, you're not alone. Investors are often keen on discovering alternative investment options beyond common stock, especially when looking for stable dividends and priority in case of liquidation. But does Ford, which has been a public company since the early 1950s, provide this type of security to investors? The answer is a bit more nuanced than you might expect.

Preferred Stock Explained

Before delving into Ford’s specific case, it’s crucial to understand what preferred stock is and why it matters. Preferred stock combines features of both equity and debt instruments. Holders of preferred shares receive fixed dividends, which makes this type of stock more attractive for income-focused investors. Additionally, preferred stockholders have a claim on the company’s assets before common shareholders in case of liquidation, though they still rank below bondholders.

However, preferred stockholders usually don’t have voting rights, unlike common shareholders. This might sound like a trade-off, but for investors seeking steady returns without much concern for voting on corporate governance, preferred stock is a desirable financial product.

Ford’s Approach to Financing

To answer the question directly: Ford does not currently have publicly traded preferred stock. However, it has issued preferred stock in the past under specific circumstances. For instance, during the 2008 financial crisis, when many auto manufacturers, including Ford, faced severe liquidity constraints, the company used various financial instruments to raise capital. One of these instruments was convertible preferred stock, issued as part of a broader debt and equity restructuring.

This period marked a critical turning point for Ford as the company was able to avoid bankruptcy—unlike competitors such as General Motors—through innovative financial engineering, including preferred stock issuance. While this type of stock is not currently part of Ford's regular financing structure, it serves as a historical example of how companies like Ford can use preferred stock strategically.

Why doesn’t Ford offer preferred stock regularly?

One reason Ford does not typically offer preferred stock is its reliance on debt financing and common equity. Ford has a long history of issuing bonds, which give it access to capital while allowing it to maintain control over its corporate governance. Additionally, preferred stock would require regular dividend payments, which could strain cash flow, especially during periods of financial stress.

Another factor is Ford’s strong focus on its automotive operations and long-term investments in electric vehicles (EVs) and autonomous technology. Ford’s executives may prefer to retain flexibility by issuing common stock or using traditional bonds rather than issuing preferred stock with fixed dividend obligations.

What Does Ford Offer Instead?

While preferred stock may not be on the table, Ford has several other attractive options for investors:

1. Common Stock: Ford's common stock is widely traded on the New York Stock Exchange under the ticker F. It offers investors the potential for price appreciation, along with regular dividends, albeit less predictable than those offered by preferred shares. Ford has historically paid a quarterly dividend, although this was temporarily suspended during economic downturns like the COVID-19 pandemic.

2. Corporate Bonds: Ford is an active issuer of corporate bonds, which provide a steady income stream through interest payments. Bonds are often seen as a safer investment than common stock, as bondholders have a higher claim on the company’s assets in case of liquidation. Ford’s bond ratings have fluctuated over time, reflecting the company’s financial health, but they remain a popular investment option for those seeking lower risk.

3. Convertible Debt: Ford has occasionally issued convertible bonds, which can be converted into a predetermined number of shares of common stock. This gives investors the opportunity to benefit from both fixed interest payments and potential capital appreciation if Ford’s stock price increases.

4. Ford Credit: Another avenue for investors to consider is Ford Credit, a wholly owned subsidiary that offers financing to Ford's customers. Ford Credit issues securitized debt instruments, which are backed by auto loans and leases. While not a direct stock offering, these securities provide exposure to Ford's financial arm and can offer a stable income stream for investors interested in asset-backed securities.

The Impact of the Automotive Industry’s Transition

It’s important to consider that the entire automotive industry is undergoing a seismic shift, driven by the transition to electric vehicles (EVs) and increasing investment in autonomous driving technology. Ford has made significant strides in this area, particularly with the launch of its all-electric Mustang Mach-E and plans for a fully electric version of its iconic F-150 truck.

This shift requires substantial capital, which Ford is funding through traditional debt and equity offerings. Preferred stock might offer a new way to raise capital, but the company appears committed to its current mix of financing methods for the time being. Investors should keep an eye on whether the evolving market conditions push Ford to consider alternative forms of financing, including preferred stock.

A Look at Competitors and Their Use of Preferred Stock

While Ford may not offer preferred stock at the moment, it’s useful to compare its approach to that of its competitors. General Motors (GM), for example, has issued preferred stock as part of its capital structure in recent years. GM's preferred shares offer a fixed dividend and are traded on public markets, making them an attractive option for investors seeking income.

Similarly, Tesla, Ford’s rapidly growing competitor in the EV market, has not issued preferred stock either. Tesla has favored equity offerings and convertible debt as its primary sources of financing, much like Ford. This is reflective of the broader trend among automakers to prioritize flexibility and avoid long-term dividend obligations tied to preferred stock.

The Bottom Line: Will Ford Issue Preferred Stock Again?

Given the evolving nature of the automotive industry and the increasing demand for capital to fund new technologies, it’s not out of the question that Ford could once again issue preferred stock in the future. However, for now, the company seems content with its existing mix of common stock, bonds, and other financial instruments.

For investors looking for a more stable, income-focused investment in Ford, bonds and asset-backed securities like those issued by Ford Credit may provide a better alternative to common stock. On the other hand, if you’re comfortable with the risks associated with common equity and want exposure to Ford’s future growth, particularly in the electric vehicle space, common stock remains the most accessible option.

In summary, while Ford does not currently offer preferred stock, its historical use of this financial instrument and its ongoing reliance on other forms of capital markets make it an intriguing company to watch. As the auto industry continues to transform, Ford’s financial strategy will likely evolve, potentially opening the door for preferred stock offerings in the future.