An EV stock with a high-yield dividend

Ford (NYSE:F) is turning into a high-yielding dividend stock — and for good reason. Sometimes a stock becomes a high yield stock because the stock price drops while the dividend payment stays the same. This is obviously not the ideal way for shareholders to become owners of high yielding dividend stocks.

In the case of Ford, the company used its second quarter earnings call to announce that it was increasing its quarterly dividend payout by 50% to $0.15 per share, translating into a dividend yield of attractive term of 4%, higher than the market.

Image source: Ford.

A rare EV stock with a dividend

Investors who want exposure to the electric vehicle (EV) space but are wary of the middle of companies that aren’t making a profit or trading at nose-bleeding valuations might be well served by considering Ford, a rare VE game with an enticing dividend.

Popular electric vehicle stocks like Lucid Group and Fisker are far from profitable and therefore cannot be valued using a price/earnings multiple, but they trade at extremely high price/sell multiples. You’re here is profitable but is trading at a daunting valuation of more than 100 times earnings. Meanwhile, Ford continues to move forward, developing an exciting portfolio of electric vehicle offerings while trading at a modest valuation of five times earnings.

Of course, Ford faces challenges, as it does with any stock that trades at a low valuation – otherwise it wouldn’t be trading at five times earnings. Investors and analysts are concerned about supply chain issues that have plagued the auto industry over the past year and more, and auto manufacturing is a notoriously cyclical industry. But with this modest valuation, a compelling dividend payout, and promising success so far on the EV front, I think the risk is worth it for investors.

An electrifying program

Ford is a legacy automaker of the Detroit Big Three, so perhaps its image isn’t as forward-thinking as Tesla or Lucid. But that doesn’t mean it can’t be a leader in electric vehicles. Ford has created electric versions of some of its best-selling vehicles, like the F-150 Lightning and the Mustang Mach-E. Offering electric versions of these iconic American vehicles is a recipe for success.

During the second quarter earnings call, CEO Jim Farley said the company had been overwhelmed by demand for this first generation of Ford electric vehicles, adding, “These products are in the market right now and we have strong banks of multi-year orders. We sell them as fast as we can manufacture them.”

The Mustang Mach-E was the sixth most searched car on MotorTrend in July, so there is a lot of interest in this product line. The Mustang Mach-E beat Tesla’s Model 3 for the honor of consumer reports‘ best electric vehicle for 2022, cementing the idea that Ford is a force to be reckoned with in the electric vehicle space.

For July, Ford reported an impressive 169% increase in EV sales year-on-year, though admittedly that’s coming off a low base from a year ago.

Just because a company makes electric vehicles isn’t a reason to invest in a stock on its own – but in Ford’s case, this entry into electric vehicles has highlighted it for a whole new customer base. potential. Ford found that 75% of reservation holders for the F-150 Lightning BEV were new to Ford, and a similar 70% of Mustang Mach-E buyers were also first-time Ford buyers.

And while everyone is excited about electric vehicles, let’s not forget that Ford still has a solid business in traditional vehicles. The Ford Maverick was the second most searched vehicle on MotorTrend for July and won the 2022 North American Truck of the Year award at the North American International Auto Show in Detroit, while the facelifted Ford Bronco won the North American Utility Vehicle award from the year 2022 at the same event.

Ford is offering an exciting lineup of new variants of its already popular vehicles that are slated to hit the road soon, such as the Bronco Raptor, Bronco Everglades and F-150 Raptor R. For July, overall vehicle sales were up 36% from compared to the year before.

Is Ford a buy?

More importantly, Ford’s efforts seem to translate up and down. During the second quarter, revenue increased to $40.2 billion, an increase of $13.4 billion from a year ago. The company is now targeting between $11.5 billion and $12.5 billion in adjusted EBIT (earnings before interest and taxes) for 2022, an increase of 15% to 25% from 2021.

Ford presents itself as a unique opportunity in the electric vehicle space to invest in a company with an attractive fleet of electric vehicles on the road and strong demand for more, while trading at an attractive valuation and paying shareholders a growing dividend.

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Michael Byrne has no position in any of the stocks mentioned. The Motley Fool holds positions and endorses Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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