Let’s Drive to Some Dividends, F

We were looking at our list of stocks we already own.  Looking at our list, REITs are too big in our portfolio.  Looking through our list, Ford (F) was sticking out to me.  Let’s Drive to Some Dividends and buy some Ford (F).

Ford

Ford’s Background

Ford (F) designs, manufactures and sells automobiles such as cars, truck, and SUVs.  They sell to the US, Europe, Africa, Asia, and South America.  Over 100 years ago, they were founded in 1903 and they are headquartered in Dearborn, Michigan.  They have almost 200,000 employees.

Valuation

Currently, Ford (F) has a 6.2 PE and a 0.4 PS.  That is cheap.  We believe there is a couple of reasons for this.  Currently, the world economy could be doing better.  If things get worse, their PE could easily go from 6.2 to 12.4 if their earnings get cut in half. However, if this is the downside, this low price hopefully has this priced in.  Considering the bankruptcies in the auto industry several years ago, that fear could still be in some people’s minds.  We are happy to pick up some cheap shares in a great Americans company.


Future

Ford (F) will have an interesting future coming up.  We believe there is a few trends that will continue.  One is more fuel-efficient cars.  Back then, you might have a car at 20 MPG.  Upgrading to a new car could easily bring you up to 35 MPG, saving you 320 gallons of gas a year.  At $3 a gallon over 11-year average, that could save over $14,000 in gas savings with some assumptions.  That is almost a reason enough in itself to buy a new car.  I got me a 50 mpg car to save money in gas.  In addition, electric cars are coming, bringing an even greater fuel savings.  Imagine instead of going to the gas station, you just plug your car in when you get home from work or the store.  This will be a time saver and cash saver.  So as they become more popular, this will cause a large replacement cycle.  In addition, the last I read, the average car on the road is 11 years old.  Cars need replaced.

The next big push will be self-driving ride sharing cars.  This will probably decrease the number of cars on the road.  Instead of every house having a car, a self-driving ride sharing car could support I am guessing 10-20 houses.  While this might be 10 year or 20 years out, it is coming eventually.  While this will greatly reduce volume, they will come with ever more technology such as sensors, computers, gadgets, and fancy leather, increasing the prices per car to offset decreased volume.  I am guessing that combo Hybrid/electric SUVs/vans will be the top vehicles sold.  So while self-driving cars will be a head wind to numbers of cars sold, higher prices from electronics and larger vehicles.

Drive to Some Dividends

Ford (F) almost became a dividend contender, except that they decided to add a once a year special dividend.  That way, instead of potentially having to cut their main dividend in the future, they can just adjust their special dividend every year.  This will help keep their regular stable and flat. Being that Ford (F) is a cyclical company, this makes sense to fluctuate the dividend through feast and famine.

What I bought

So I bought 20 shares of Ford (F) for $273.10, including those fast commissions.  This will add another $12.00 a year in dividends.  Hey, that is a free tank of gas for me.  Gotta like those low gas prices and a fuel-efficient car.  How do you drive for your dividends? You can review more stock purchases here.

Are you driving to some dividends too? Please feel free to share in the comment section below.

 

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