If you have $1,000 sitting idle after the holidays and are eyeing some undervalued stocks, Ford Motor Company (NYSE: F) may just be the unique blend of value and dividend yield you need.
With Ford trading at an attractive price-to-earnings ratio of 7 and offering a dividend yield over 5%, potential investors should take note of its solid upside potential over the next few years. The company appears well-positioned to transform its cash-burning electric vehicle (EV) business into a profitable operation.
Navigating the Road Ahead
While the automotive industry is on the cusp of a transformative period, driven by the transition to EVs and exciting advancements in technology for driverless vehicles, there are substantial costs associated with these developments.
Ford’s decision to step back from Argo AI and incur a $2.7 billion charge reflects a prudent approach to investing in driverless vehicle technology. This move, in sharp contrast to its rival General Motors’ struggles with Cruise, signals a more farsighted strategy from Ford. Rather than pouring capital into a commercially uncertain venture, Ford’s focus on enhancing Level 2 and 3 driverless systems represents a potentially more lucrative path.
Strategic Shifts and Profitability
Further strengthening Ford’s potential is the turnaround anticipated in its Model e business unit. While the unit is expected to incur losses of approximately $4.5 billion in 2023, management foresees a path to profitability by the end of 2026. This trajectory will be fueled by improved scale, design enhancements, and other factors.
Image source: Ford Motor Company.
The recent record fourth-quarter EV sales highlight Ford’s promising growth in this segment, with the F-150 Lightning emerging as the top-selling electric truck and the F-150 Hybrid leading the full-size hybrid truck category in 2023. This success underscores Ford’s potential transition from conventional gas-powered trucks to EVs, a vital pivot for the company’s profitability.
The Dividend Perspective
One standout reason to consider investing in Ford is its robust dividend history. Beyond its regular payouts, such as the recent $0.65-per-share special dividend resulting from the sale of its stake in Rivian Automotive, Ford boasts a consistent dividend track record. This places the company in a favorable position for sustained long-term returns.
Despite Ford’s stock experiencing modest gains in recent years, its near-term potential appears promising as the company steers its EVs toward profitability and dials down its investment in expensive driverless vehicle technology. Moreover, its 5% dividend yield remains an attractive proposition for investors seeking income.
Should you invest $1,000 in Ford Motor Company right now?
Before you delve into Ford Motor Company’s stock, it’s essential to consider this:
The Motley Fool Stock Advisor recently uncovered what they consider the 10 best stocks for investors’ portfolios, and interestingly, Ford Motor Company wasn’t among them. These select stocks carry the potential for substantial returns in the coming years.
The Stock Advisor service provides easily understandable guidance, comprehensive portfolio-building support, regular analyst updates, and two new stock picks each month. Since 2002, the Stock Advisor service has outperformed the S&P 500 by over threefold*.
*Stock Advisor returns as of January 8, 2024
