Published Wed, 11 Sep 2019 06:16:24 -0400 on Seeking Alpha
Owners of Ford Motor Company shares (F) woke up to a nasty surprise on Tuesday morning after the storied company found its bonds were downgraded to junk.
While the news of this downgrade likely carries an emotional impact for workers, bondholders, and shareholders, the larger ramifications need to be brought into focus.
Above is the daily return profile on Ford going back to July 2010. The overall trend is toward more extreme daily returns, with an overall wider return band, signifying a choppier return profile for investors. The dividend may be juicy, but there's quite a bit of churn required to earn it!
Yahoo Finance - Compiled by Author
Here is a list of the worst 5% of daily returns going back to July 2012. The worst return was a little larger than 8%, dolled out in 2016. The left-most black line shows the conditional mean return, just shy of -4%. The middle dotted line is the conditional median: closer to -3.3%. The red dotted line, at around -2.6%, demonstrates the cut-off point as to where Ford's distribution officially gets its "fat tails."
The current news flash has harmed Ford shares. Investors, for the time being at least, are taking the downgrade in stride.
Back in late 2018, when asked whether Ford prioritized the current dividend vs. investment grade status, the CFO responded as follows:
[Ford's overall financial strategy] starts with a strong balance sheet, an... Read more