I’ve owned shares of Ford (F 0.89%) on and off for several years. I bought my initial set by writing put options, lost those by writing call options, and acquired more through puts a few years ago. My strategy with Ford has been to generate income from writing options and collecting its lucrative dividend, while also benefiting from some stock price growth.
Unfortunately, Ford’s stock has gotten stuck in reverse over the past few years. As a result, call options don’t pay very well. Meanwhile, Ford’s dividend payment is at risk because of the potential impact of tariffs on its business.
So I’m reconsidering Ford’s role in my portfolio. Here’s a look at one stock I’m considering as a potential replacement for the auto giant.
Image source: Getty Images.
Trouble turning things around
Ford has been working to reinvigorate its iconic brand through its Ford+ growth plan. The company launched that strategy several years ago, which combines vehicles with software and services. It also focuses the company’s efforts on three core areas: Ford Blue, for legacy gas-powered and hybrid vehicles; Ford Model e, for electric vehicles; and Ford Pro, for vehicles built for commercial customers.
The company’s strategy has yet to deliver for shareholders. Wholesale sales of vehicles from its Ford Blue and Ford Model e segments both declined last year. While revenue for Ford Blue was flat because of price increases, sales in the company’s Ford Model e growth engine stalled, slumping 35%. As a result, that business unit continues to lose a lot of money.
Ford initially expected that 2025 would be a year of significant progress for its Ford+ strategy. CFO Sherry House stated in the fourth-quarter earnings report that “the Ford+ plan is built on strong fundamentals, and we expect to build momentum and earnings power through 2025.” However, the uncertain impact of tariffs on the auto industry caused the company to suspend its guidance in the first quarter. If its cash flow declines too much, the company might need to cut its dividend payment.
With the dividend at risk and the share price in decline, Ford isn’t delivering the income and growth I had hoped it would for my portfolio. That’s why I’m considering selling and reallocating that money to a new position.
A healthier dividend stock
One company I’m considering as a replacement for Ford is Healthpeak Properties (DOC 0.38%). The healthcare REIT owns a diversified portfolio of healthcare properties, including outpatient medical buildings, purpose-built lab facilities, and senior housing communities. Demand for space in its properties is strong and growing.
Healthpeak Properties signs long-term leases with leading healthcare operators for its outpatient medical and lab facilities, which generate stable and growing cash flow. Meanwhile, its senior housing communities are benefiting from durable and growing demand as the population ages. Healthpeak expects the income from its existing properties to rise at a 3% to 4% annual rate from rental escalations in existing leases and signing new ones at higher rates as legacy leases expire.
The company’s stable and growing cash flow enables it to pay an attractive dividend that currently yields over 6.6%. The REIT recently switched to a monthly payment schedule, making it a great investment for generating passive income.
The REIT’s higher-yielding dividend is on a much more sustainable foundation than Ford’s payout. Healthpeak has a low dividend payout ratio for a REIT, enabling it to retain additional cash to invest in new income-generating healthcare real estate. It also has a strong investment-grade balance sheet. The company currently estimates that it has between $500 million and $1 billion of dry powder to make accretive investments.
Healthpeak’s durable and growing income should enable it to steadily increase its dividend. It recently raised its payment by 2%. As a result, the company should deliver income and growth for investors.
Looking at trade-in options
Ford is no longer meeting the needs of my portfolio. That’s leading me to consider selling the auto company and reinvesting that cash into a company that can better deliver on my desire for growth and income, like Healthpeak Properties.
