Why Dividend King Stellantis Stock Dropped 7% Today

Stock of Stellantis (NYSE: STLA) , one of the Big Three automakers by virtue of its ownership of Chrysler, Dodge, and Jeep, slid 7.2% through 12:15 p.m. ET Thursday after the company reported a big drop in profits for the first half of 2024.

Analysts forecast Stellantis would report a profit of 6.25 billion euros ($6.1 billion) in the year's first half, on sales of 86.5 billion euros. In fact, net profit was only 5.65 billion euros, and sales came in at 85 billion euros ($92.2 billion).

Stellantis' first-half earnings decline

Compared to last year's first half, that's a sales decline of 14%, and a 48% collapse in profits. Management blamed "foreign exchange and restructuring costs" for some of this, but admitted that "lower volume and mix" (i.e., selling less profitable vehicles) also contributed to the steep drop-off.

Worse, Stellantis generated no industrial free cash flow in the year's first half, instead burning through about 400 million euros in cash -- about $434 million.

Is Stellantis stock a sell?

Investors don't seem happy with these results, and I don't blame them. Management isn't satisfied, either, with CEO Carlos Tavares commenting, "The first half of 2024 fell short of our expectations."

Management says it's already "taking decisive actions to address operational challenges, including North American share and inventory performance." Among its initiatives, Stellantis says it's introducing 20 new car models this year, and adding ChatGPT functionality to some of them. Stellantis also notes that its inventory levels have already fallen 3% from this time last year, and it expects to be able to report "positive full-year Industrial free cash flow" by the end of 2024.

But color me unimpressed.

After generating strong free cash flow of more than $11 billion in 2021, $12 billion in 2022, and $13 billion in 2023, a promise to generate free cash flow in excess of zero dollars, zero cents, falls a bit flat here in 2024. Stellantis' 8.5% dividend yield is still a big attraction, but without the cash to back it up, even that attraction may not last forever.

Rich Smith has positions in Stellantis. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy .