One of the most controversial investments at the moment, Ford Motor Company (NYSE:$F) is a cheap buy, but at the price of a massive dividend for an industrial firm.
With both bears and bulls arguing compelling statements for Ford stock, let’s look at reasons why you should or shouldn’t buy Ford’s stock.
Cons
The Tesla Pickup Truck
Tesla (NASDAQ:$TSLA) CEO Elon Musk has long hinted at the future production of an electric pickup truck from the company. Just earlier this month, Musk suggested that Tesla could make a pick-up based on its pre-existing semi technology. If and when this happens, Ford’s F-150, America’s top-selling truck for the past 40 years, will undeniably wreak havoc, especially since the model accounts for nearly half of Ford’s entire gross profit. Any competition in this segment from a potential Tesla competitor could be a deal breaker.
Too Much Debt
During the financial crisis, Ford stock lost more than 80% of its value. General Motors Company (NYSE:$GM) went bankrupt. While Ford has slashed its long-term debt load from $141 billion in 2007 to $59 billion in 2011, the number has racked up et again. Recently, the company hit the $95 billion mark for long-term loans. That means that when the next recession happens, Ford might be hit very hard.
Pros
Huge Dividend
Generally, the main appeal of Ford stock is that a high dividend is provided without hassle. Ford’s current 60-cent-per-year dividend adds up to a 5.1% dividend yield. On the S&P 500, only 14 companies offer a 5% or greater rate. Ford is doing plenty to return cash to its shareholders.
Trump Upside
Despite the unpredictability of the Trump Administration, it is safe to say that, for the time being, the company is continuing to rework the NAFTA in ways that may aid domestic automakers. Last week, Commerce Secretary Wilbur Ross kept the issue in focus, insinuating that new rules will be added to ensure the rebound of US manufacturing.
In conclusion, the tradeoff between risk and reward in purchasing Ford Stock is up to your discretion. The quick dividend is appealing, but keep a close eye on the auto industry’s trajectory and be prepared to bail if the current slowdown persists.
Featured Image: twitter
