A Few Reasons Why We Like Ford Motors
The automakers have not been doing to well since the economic crash in 2008. Recently Ford Motors’ (F) sales in January disappointed, no there is not doubt that the same can be said about Ford’s competitors. Overall, things weren’t relatively strong for the quarter, with some notable weakness, but it appears things are improving. A recent article laid out some strengths for Ford that I will discuss. First, we should discuss profit. Ford’s most recent quarterly pre-tax profit of $1.3 billion was comprised of $924 million from the automotive sector and another $355 million came from Ford’s financial services.
This indicates a growing percentage of income derived from financial services (28 percent in the recent quarter versus $1.7 billion or 19.5 percent for the year). Europe remains a drag on the sector. Ford saw losses of over $1.6 billion in the European market. North America was strong as it contributed$8.8 billion to profit before taxes. One thing is certain and that is, Ford brought in its highest profit from its automotive segment in the last decade despite numerous headwinds, including high unemployment and fiscal uncertainty. There are several reasons to like Ford at current levels.
Net income for the fourth quarter came in at $3.0 billion or $0.74 per share compared to $1.6 billion or $0.40 per share in the year ago quarter. This represents a nearly a doubling year over year. For 2013 Ford saw profits of $7.2 billion or $1.76 per share compared to $5.7 billion or $1.42 per share in 2012, nearly 25 percent higher year over year. While income growth is projected to slow a bit this year, I suspect it will grow nonetheless.
Ford’s dividend growth over the last few quarters and the share price being down 2.5 percent year to date has pushed Ford’s current yield to 3.3 percent. A high yielding play in a low interest rate environment cuts off the downside for the stock. Generally, a selloff that puts a stocks yield over 4 percent is rare and has always indicated a buy, if the broader market was responsible for bringing it down.