3 Reasons to Buy the Stock:
- Strong dividend which could increase
- Attractive price with strong lines of business
- Low energy prices will continue to make for a healthy auto industry
Even though Ford’s share price has been struggling, we believe there are some underlying items which makes the company an attractive investment right now. Ford is a dividend paying machine giving its share price a floor to its intrinsic value and we believe Ford could raise it’s dividend this year. Add together Ford’s $.60 dividend with the $.25 special dividend which was just revealed and its yield jumps to more than 7%.
Primarily using Ford’s historical P/E, we believe it’s currently undervalued. Ford’s normal P/E over the last 5 years is just short of 10, with the least being around 2 and the highest being around 20. The lowest analyst estimate is $14, but the average analyst estimate for the stock is almost $17. Thus, if Ford is in-line with their average P/E it will trade around $15, which is an increase of about 30% from current levels.
With oil and gas looking to remain low for the foreseeable future, the derivative effect will continue to be a boost to the auto industry, further benefiting Ford. The low prices have helped the increase in vehicle renovations amongst consumers, and it reduces the input costs for the company.
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*Disclosure: Stocks discussed to watch are strictly the JU FIBER Club’s opinion and not a recommendation to buy or sell positions.