Ford: Invest Now Or Never?

Ford Motor Company (F) is an American multinational automaker that sells vehicles and luxury vehicles under the Ford and Lincoln brands. The company was founded in 1903 and is currently headquartered in Dearborn, Michigan. As of July 11, 2024, Ford's stock price closed at $13.47, with a market capitalization of $51.65 billion.

So, is it smart to invest in Ford right now? Well, that depends on your investment strategy and risk tolerance. Here are some points to consider:

Positives:

- Ford has a strong dividend yield of around 5-6%, which is attractive for income-seeking investors.

- The company is investing heavily in new technologies, including autonomous vehicles, ride-sharing, and electric cars. This could position them well for the future of the automotive industry.

- Ford's electric vehicle (EV) business, Ford Model e, posted impressive growth in the third quarter of 2023, with a 44% increase in units and a 26% rise in sales.

- Ford's stock has been upgraded to a Strong Buy candidate by some analysts, with positive signals in the chart and a general buy signal from the relation between short-term and long-term moving averages.

- Ford's relative strength compared to the S&P 500 has been notable, and it has outperformed other automakers in terms of year-to-date returns.

Negatives:

- Ford's stock performance has been underwhelming in the longer term, with shares down from $13 at the start of 2018 and 52% from its 2014 high.

- The automotive industry is capital-intensive, and Ford has unfavorable economic characteristics, including typically low return on invested capital and operating margins.

- Ford's EV business is expected to register an operating loss of $4.5 billion for 2023, and softer-than-expected demand has led management to postpone $12 billion in EV-related investments.

- Ford's dividend payout ratio remains above 100%, which could be a concern for investors.

- There are concerns about Ford's EV battery technology lagging behind competitors like Tesla, and wariness about their strategy of slashing car models.

In conclusion, whether investing in Ford is smart depends on your individual investment goals and risk tolerance. While there are some positive signals and Ford's investment in new technologies is promising, the company faces challenges in a competitive and rapidly changing automotive industry. It is always recommended to conduct your own due diligence and consult with a financial advisor before making any investment decisions.

Ford's investment in electric vehicles

Ford Motor Company has been making significant investments in electric vehicles (EVs) in a bid to compete with industry leader Tesla. In March 2022, Ford announced it would boost spending on EVs to $50 billion through 2026, up from the previous $30 billion. This reorganization and additional investment signal Ford's aggressive bet on electrification.

Ford's CEO, Jim Farley, has stated plans to build more than 2 million EVs by 2026, which would account for about one-third of its annual global production, with EVs rising to 50% of its total volume by 2030. This shift is expected to help Ford achieve its goal of having 40% to 50% of its global vehicle volume be fully electric by 2030.

In June 2022, Ford announced a $3.7 billion investment across three mid-western states to ramp up production of trucks and vans, including new electric models. This includes a $2 billion investment in its home state of Michigan, which is expected to create 2,000 new jobs and increase production of the F-150 Lightning electric pickup to 150,000 trucks per year. Ford also plans to spend $1.5 billion at its Ohio assembly plant to build a new electric commercial vehicle by 2025 and $100 million in an engine plant and transmission factory in the state. Additionally, Ford is investing $95 million in Missouri to add a factory shift to produce gas-powered Transit commercial vans and electric E-Transit vans.

Ford is also investing heavily in battery manufacturing facilities. In September 2021, the company announced an $11.4 billion investment in new battery plants in Tennessee and Kentucky, which are expected to create nearly 11,000 new jobs. These facilities, known as BlueOval City and BlueOval SK Battery Park, will produce next-generation electric F-Series pickups and advanced batteries to power Ford and Lincoln EVs.

Ford's investments in electrification have had a positive impact on its shares, with a 140% gain in 2021, briefly surpassing General Motors in market cap. However, there have been challenges along the way, including recalls and supply chain issues. Despite these setbacks, Ford's commitment to EVs remains strong, and the company is expected to continue playing a significant role in the shift towards electric vehicles.

Ford's dividend yield

Ford Motor Company (F) has paid dividends to its shareholders within the past 12 months. On May 7, 2024, F had an ex-dividend date, with a dividend payout of $0.15 per share on June 3, 2024. F's annual dividend yield is 6.01%, and its payout ratio is 41.27% ($0.78/$0.97), which is sustainable.

The dividend yield of 5.4% might attract income-seeking investors. However, it is essential to note that Ford's stock price has declined, and the company has a history of underperformance compared to the S&P 500.

Ford's dividend payout history shows that the company has been making regular quarterly payments. The dividend capture strategy for F involves buying shares one day before the ex-dividend date and selling them when the price recovers.

While Ford's dividend yield is attractive, it is important to consider the company's overall financial performance and outlook before making an investment decision.

Ford's stock price history

Ford Motor Company (F) has a long history of stock price fluctuations, with its performance in recent years being influenced by its investments in electrification and autonomous vehicles.

As of July 10, 2024, Ford's stock closed at $13.17, with the all-time high being $21.26 on January 14, 2022. The 52-week high and low are $15.42 and $9.63, respectively.

Looking at the broader picture, Ford's stock has not performed well over the last decade. An investment of $10,000 ten years ago would only be worth about $10,080 today, a mere 7.7% return. This underperformance is partly due to the capital-intensive nature of the automotive industry and Ford's low return on invested capital and operating margins.

However, Ford's investment in electrification and its pivot towards "the digital future" have been significant. The unveiling of the Mustang Mach-E, an all-electric crossover, and the F-150 Lightning all-electric pickup have been pivotal moments in this transition. Ford's EV lineup has been a driver of sales growth, with total US EV sales increasing by 120% year-over-year.

Despite this, Ford's stock price has been volatile. In 2021, Ford's shares surged by 140%, briefly surpassing General Motors (GM) in market cap. However, supply chain issues and recalls impacted its performance, and its stock retreated during the recent bear market.

As of July 11, 2024, Ford's stock is considered a "Strong Buy" by some analysts, with positive signals in the short and long term. The stock has been rising, and the volume has increased, indicating a positive technical signal.

In summary, while Ford's stock price history has been turbulent, its recent investments in electrification and digital technologies may provide new opportunities for growth. However, the automotive industry's challenges and Ford's past performance suggest a cautious approach for long-term investors.

Ford's competition

Ford Motor Company has a wide range of competitors in the automotive industry. Here is an overview of Ford's main competitors:

General Motors:

General Motors Company, popularly known as GM, is an American automobile conglomerate founded in 1908. It is headquartered in Detroit and has a global presence in over 35 countries. GM offers a range of automobiles, trucks, and automotive parts under brands such as Chevrolet, GMC, Buick, Cadillac, Baojun, and Wuling. In recent years, GM has invested in cutting-edge technology and driverless vehicle technology.

Toyota Motors:

Toyota Motors is a Japanese automotive manufacturer and is currently the leader in the industry. It was the first company to produce 10 million vehicles in a year and has a strong focus on hybrid electric vehicles. Toyota has a diverse brand portfolio, including Toyota, Lexus, Ranz, and Daihatsu.

Honda Motor Company:

Honda is a Japanese multinational group founded in 1946. It is known for its range of automobiles, motorcycles, aircraft, and power equipment. Honda has been the world's largest motorcycle manufacturer since 1959 and entered the automotive market in 1959. With over 215,000 employees and a revenue of $215 billion in 2019, Honda is a strong competitor to Ford.

Hyundai Motors:

Hyundai Motor Company is a South Korean automotive manufacturer founded in 1967. It is the third-largest automobile manufacturer in the world and has a strong presence in the US market. Hyundai is known for its commitment to quality, design, and research and has an annual manufacturing capacity of 1.5 million units.

Tesla Motors:

Tesla Inc. is a younger competitor in the automotive industry, founded in 2003 by Elon Musk. Tesla specializes in electric vehicles and residential solar energy products. It has become one of the most valuable automakers in the world, with a market capitalization of over $700 billion as of 2023. Tesla's focus on electrification and innovation makes it a key competitor to Ford in the evolving automotive market.

In addition to the above-mentioned companies, Ford also competes with other well-known automotive brands such as Tata Motors, Volkswagen, Mercedes-Benz, BMW, Fiat Chrysler Automobiles, and Nissan. The automotive industry is highly competitive, and Ford's competitors are continuously investing in new technologies, designs, and strategic acquisitions to gain an edge in the market.

Ford's financial health

Ford Motor Company's financial health has been a concern for investors and analysts. While the company has made significant investments in new technologies and electrification of its vehicle lineup, there are several factors that raise questions about its financial stability.

One of the main concerns is Ford's debt obligations. As of 2020, the company was still paying off a $5.9 billion loan from the U.S. government, taken during the Great Recession in 2009. This loan, with its associated interest, has been an additional burden for Ford, especially during times of economic downturn. Ford has also had to seek extensions on loans from banks, signalling cash flow issues.

Another issue is Ford's performance compared to its competitors and the broader market. In the last decade, Ford has underperformed, with a return of only 7.7%, which would have resulted in a loss of purchasing power when factoring in inflation. This is in contrast to the S&P 500, which would have seen a tripling of the initial investment over the same period. Ford's stock price has also entered a free fall, touching 11-year lows, and the company has struggled to grow its market share in key regions.

Ford's financial reports have shown a mix of results. In the first nine months of 2023, the company posted 14% revenue growth year-over-year, building on the back of double-digit gains in 2022. However, in the fourth quarter of 2022, Ford's revenue rose 10% to $39.4 billion, falling short of Wall Street expectations. The company has also faced challenges with supply chain disruptions and inflationary pressures, which have impacted its profitability.

Ford's investment in electric vehicles (EVs) is seen as a potential driver of growth. The company's EV operations, housed under Ford Model e, posted unit and sales growth of 44% and 26%, respectively, in the third quarter of 2023. However, Model e is expected to register an operating loss for the full year, and Ford has postponed $12 billion in EV-related investments due to softer-than-expected demand.

Analysts have also pointed out the capital-intensive nature of the automotive industry, with high costs associated with research and development, manufacturing, and a unionized workforce. Ford's return on invested capital and operating margins have typically been low, which doesn't make it a high-quality enterprise in the eyes of investors.

In summary, Ford's financial health is a mixed bag. While the company has shown some positive signs, such as revenue growth and investment in new technologies, it also faces challenges with debt obligations, underperformance compared to the market, and concerns about its EV strategy. As such, investors are advised to carefully consider these factors before making any investment decisions regarding Ford.

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