Ford: 7% Drop Plus 6% Dividend Yield Equals Buy

Jan. 17, 2018 2:37 PM ETFord Motor Company (F)186 Comments
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  • Ford stock fell 7% after giving preliminary earnings results for 2017 and guidance for 2018.
  • Earnings grew in 2017, but higher costs and investment spending will cause earnings to decline in 2018.
  • Ford is addressing its cost structure with cost-cutting measures, and its investments in electric and autonomous vehicles will fuel future growth.
  • In the meantime, Ford also announced a $0.13 supplemental dividend. With a total dividend yield of 6% and a low valuation, Ford is a buy.

By Bob Ciura

Just when things were looking up for the U.S. automakers, shares of Ford Motor Company (NYSE:F) fell over 7% on Wednesday, January 17 when the company announced preliminary earnings for 2017 that came in below analyst expectations. Ford's guidance for 2018 also did not meet expectations.

However, Ford also declared a supplemental dividend of $0.13 per share. Combined with its regular annual dividend of $0.60, Ford's total dividend yield for 2018 is nearly 6%. This places Ford on our list of high-yield stocks. You can see the full list of established 5%-plus yielding stocks here.

Ford is struggling with higher costs, which the company is addressing through renewed efficiency initiatives. Ford is a cyclical company, but has a long history of navigating difficult climates. It has been in operation for more than 100 years. With a dividend yield above 3%, Ford meets our definition of a "blue chip" stock. You can see our full list of blue chip stocks here.

Ford stock appears to be undervalued, given its high dividend and future growth potential. This could make Ford an appealing stock for value and income in 2018.

News Overview

For 2017, Ford expects adjusted earnings per share of $1.78. This came in below analyst forecasts, which called for earnings per share of $1.84. For 2018, Ford expects adjusted earnings per share in a range of $1.45 to $1.70. At the midpoint of guidance, Ford sees 2018 earnings per share of approximately $1.57, compared with expectations of $1.59.

After a boom in the years since the Great Recession, the U.S. automotive industry slowed down last year.

Source: CEO Strategic Update Presentation, page 7

Slowing sales, along with higher costs, caused Ford's adjusted earnings per share to decline 8.8% in 2016. But 2017 was actually a much better year

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This article was written by

Sure Dividend profile picture
Sure Dividend helps individual investors find high quality dividend growth stocks with strong competitive advantages suitable for long-term holding. The authors who write for Sure Dividend on Seeking Alpha are as follows:Bob CiuraBen ReynoldsJosh Arnold

Disclosure: I am/we are long F. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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