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Why You Should Buy 5.8%-Yielding Ford Motor

Mar. 05, 2018 10:50 AM ETFord Motor Company (F)41 Comments
Achilles Research profile picture
Achilles Research


  • Ford Motor shareholders had to put up with a lot lately.
  • Shares fell to a new 52-week low @$10.14.
  • Nevertheless, Ford Motor is in the bargain bin.
  • Negative investor sentiment likely to persist for a while.
  • An investment in F yields 5.8 percent.

Ford Motor (NYSE:F) continues to make an attractive value proposition at today's price point. Ford Motor's shares have come under pressure lately as stocks sold off, and the Trump administration announced tariffs on steel and aluminum products. Ford Motor also reported February U.S. sales results which negatively affected investor sentiment. Nonetheless, Ford Motor can best be seen as an income holding for the long haul. An investment in F yields 5.8 percent.

Ford Motor shareholders had to deal with a lot in the last four to five weeks. First, investors sold stocks into the weakness, driving share prices sharply lower. Fears over rising interest rates and surging bond yields are typically viewed hurdles for dividend-paying stocks as other asset classes become more attractive.

Secondly, the Trump administration said last week that it will impose steel and aluminum tariffs in an effort to protect domestic steel and aluminum producers. Tariffs tend to increase commodity and consumer prices, which is exactly what U.S. auto companies warned about on Friday.

Thirdly, Ford Motor released U.S. sales figures for the month of February that slightly missed analysts' estimates but nonetheless added to soured investor sentiment. The auto company said it sold 194,132 cars, trucks and SUVs in February, reflecting a 6.9 percent year-over-year decline. Analysts expected Ford Motor's February sales to decline 6.0 percent. Ford Motor's retail sales also declined, falling 8.5 percent to 123,073 vehicles.

That said, though, there were a couple of bright spots, too: Ford Motor's transaction prices remain well above industry average ($36,200 vs. $32,200). Transaction prices rose $2,100 for Ford Motor compared to February 2017. Further, Ford Motor's F Series continues to do well. The auto company sold 68,243 trucks in February, making last month the best February in terms of sales performance in 18 years.

All considered, though, it was

This article was written by

Achilles Research profile picture
I am a dividend investor and look for undervalued investments in the stock market. I identify misunderstood and undervalued equity investments and hold those securities until their price approximates my estimate of intrinsic value. I am a long-term investor only. I am building a $100,000 high-yield income portfolio. I am running this portfolio as an experiment to see if long-term sustainable income can be generated from a diversified pool of high-risk, high-yield securities. I am willing to accept high risk in order to meet my performance goals.

Analyst’s 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (41)

This is the time to buy an investment. I shouldn’t have to extol the Ford Co. to you. Remember this: what you do today determines your tomorrows,no? The price is right, pay and benefits are rising and consumer sentiment towards credit buying is positive. The future looks enterprising, but always do your own due diligence.
Happy hunting!
I see the negative sentiment persists. For income investment including DRIP, a drop in price is welcome in my mind. Long term should be alright.

Granted I wouldn't say there is blood in the street yet. So saving plenty to add later when I think the time/price is right.
netgenx profile picture
First, I will declare that I don't believe any of the "big 3" investible at this time. Margins are thin for the companies, thinner for the dealers who are mostly making money on service and used, and the industry is on the cusp of major disruption from electrification, autonomy, and ride sharing.Ford is the worst of the three at the moment as management is in transition/turmoil, and their fleet is old and due for replacement or to be dropped altogether ( Fiesta, Fusion 500, Flex?).GM is the best run of the three (never thought I'd live long enough to say that!), and even FCA is catching Ford and at least has the advantage of being a T/O target for it's Jeep brand.I know Ford is sitting on a wad of cash, but that will disappear right smartly once they start to replace their product line - Avoid
06 Mar. 2018
Quite agree with the assessment. Ford is an income stock and a very good one right now.
happyguy profile picture
so you think exports won't be hurt with Trumprotectionizm? I think this one is going lower, just give some time
I am not buying this Stock. The overall trend is downward as indicated by the fact that the 200 da MA line is downward plus the stock is below that line. Nowhere do I see an indication that it’s made it’s bottom and is headed upward. I noted a reader above say it’s generated a ton of money. That’s not so. $15 down to $10 THATS A LOSS.
Buying F, like buying any other investment, depends on what price you paid. I got in at 10.43 so for me, a good investment. Others who bought at $12 or more, not. I see F as a good dividend play at lower prices but once stock goes above 12%, dividend rate not high enough (other less risky 5% +) for just the dividend, more of a price appreciation play. I think F stock will be volatile in 2018 and if new models successful and continue in ev and AV, 2019-2020 will be better times. So, for me, a hold.
swaps profile picture
This dilemma for Ford (long F) derives partly from the fact that globalism is in reality not monolithic. U S steel producers have huge burdens complying with environmental regs that the rest of the global world is free from. Noted these comments attributed to U S Steel and quoted in a digital page run by CSI Market.

U. S. Steel’s businesses are subject to numerous federal, state and local laws and regulations relating to the storage, handling, emission and discharge of environmentally sensitive materials. U. S. Steel believes that our major North American and many European and Japanese integrated steel competitors are confronted by substantially similar environmental conditions and thus does not believe that our relative position with regard to such competitors is materially affected by the impact of environmental laws and regulations. However, the costs and operating restrictions necessary for compliance with environmental laws and regulations may have an adverse effect on U. S. Steel’s competitive position with regard to domestic mini-mills, some foreign steel producers (particularly in developing economies such as China) and producers of materials which compete with steel, all of which may not be required to undertake equivalent costs in their operations. In addition, the specific impact on each competitor varies depending on a number of factors, including the age and location of its operating facilities and its production methods. U. S. Steel is also responsible for remediation costs related to our prior disposal of environmentally sensitive materials. Many of our competitors have fewer historical liabilities.
Tdot profile picture
So what you are saying is that if US Steel has a competitor, whether foreign or domestic, who can provide automakers and other steel-dependent manufacturers with steel at a lower cost structure and selling price than US Steel, then those competitors should be forced to pay penalties, tariffs, and import fees in order to "equalize" costs set the commodity prices to whatever prices the high cost US Steel wants to charge?

Smells a little fishy.

Setting prices below cost in predatory pricing to undercut competitors is one thing. Getting government aid to set prices by forcing competitors to increase their prices so they can no longer compete in the "free market" is another thing.

Simply having a naturally lower cost solution for the same product is what competition is all about.
It is the labor costs, go talk to the unions?
Everyone needs to look where the puck is going in the auto industry. The winners of tomorrow in this industry are companies like Google and similar. All the profits of tomorrow will be in the software of cars. The hardware will be a low margin cut-throat industry with little value add.
Long F. Like the company & trust the family.
HackFab profile picture
"Like the company & trust the family."

Except Martha, and The Lions. Disclosure: Season Ticket Holder...
Ford seems to be late to the party for the last few years. If they would have came out with the new Ranger and Bronco 2 years ago, they would really be in the $$$ right now. The car market is a bust right now. Trucks and utility vehicles is where it is right now. Ford share price hasn't been over $13s in years. They need fresh blood and ideas to get into the game. Better future vision is needed desperately!
It was over $13 in January

I don't necessarily disagree with this. But keep in mind that Ford selling cars is not a problem. YoY volume and pricing were actually positive for Ford. That is coming off a pretty strong 2016.

Where Ford has taken a hit is on the cost side. Namely commodities, materials, engineering and currency exchange.
08 Mar. 2018
I guess Ford should have taken government (US citizens) money?!? Then they'd have more to invest, but each of us would have also involuntarily invested in Ford. Likk we did GM and Chrysler..
Ford is the F-150. Without the F-150 future prospects would be dim. Here is where Ford has to draw the line.
I was disappointed when Ford closed down the Mercury division. Lincoln just cannot make it into the luxury market with its current models. Contrast Camry and Lexus models. Lincoln cannot muster quality within its brand. Too much spillover from Fusion models. Same happened with Mercury as a brand,,,,too much Ford vehicle spillover.

Toyota, Honda and GM have many models to choose from.....Ford does not.
Purple Panopticon profile picture
"2018 Lincoln Navigator production bumped 25 percent to meet new demand"

Ford is a low price dividend stock you are not getting rich but have stability with income reinvest the div long term comfort
Risk Advisor profile picture
Consumer Reports published their 2018 Annual Auto Issue this week. With respect to brand rankings by Overall Score, Ford finished at #20 based on 13 models tested, 38% of which were recommended. Focus and Fiesta both with an overall score of 42/48 (both worst in their respective classes other than Fiat's comparable models), contributed negatively to Ford's overall score of 64. Probably the most interesting article published in this Issue is entitled "Are Trucks Becoming the New Family Car?" This article states that the number of women who registered full sized pickups increased 67% from 2008 to 2016 (reaching more than 470,000 trucks in 2016). Their purchases were driven by exterior appearance, safety, and technology rather than truck capabilities such as hauling, towing, and off-road ability.
you forgot to say Ford still dominates the truck industry, for 40 years now
08 Mar. 2018
And you really trust Consumer Reports?
Ford is a super company as demonstrated by current customers comments. It’s a great time to buy some additional shares of a traditional winner at bargain prices and lower your cost basis. What you do today determines tomorrow, no?
AutoTech profile picture
Nothing Wrong With Most Fords, They're Easy to Tow.

(Fords seem to break more than any other cars we see --- I just love the business)
“Fords seem to break more...” That’s great information for investors, thanks.
"seem to" is hardly actionable evidence
Pianodude profile picture
Do you have any hard data to support this claim?
Yea why should I buy it ? .... really good question but the answer is I won’t ..Ford sucks
Wonder if anyone listened to this writer back in 2015 when he loved the yield at 4.75%.....and bought the stock in the $15's!
This "contributor" has more bad picks than anyone on SA: TCAP, GE, F, ESV... He should be filing for bankruptcy soon.
Only reason I'll buy F is to lower my cost basis and I think it will go lower - how much is the question.
How about $1.91 which is where I bought a bunch back in '09! Sometimes we get lucky.
mbpgui profile picture
IMHO F is a great safe haven in this semi-overheated market.
Ford is the Rodney Dangerfield of Stocks. You old timers remember Dangerfield. He who always complained about not getting any respect. All Ford does is make tons of money, and pays a big dividend plus special dividends. I will take a stock like that all day, and a good candidate to sell covered call options on, since they do not burst out to the upside.
VaslavN profile picture
Sir Rodney is my personal hero. We have a lot in common. Like his character in "Back to School", we don't take s**t from nobody. ;-D
VaslavN profile picture
Thornton Melon: "Do Not Go Gentle Into That Good Night"
“Good answer. I like the way you think. I’m keeping an eye on you.” Professor Turgeson
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