Investing in dividend stocks is like adding honey to your portfolio. Not only do they sweeten the pot, but they also offer a protective shield against the volatility of the stock market. Studies have proven that, over time, dividend stocks have outperformed non-dividend stocks.
One such dividend stock that stands out is the Ford Motor Company (NYSE: F), which is currently an ultra-cheap dividend option with significant upside potential.
A Road to Recovery
Ford has been navigating a bumpy road, disappointing investors with its financial performance over the past year. The company is now focused on reducing warranty costs, simplifying vehicle design, and enhancing scalability. This includes a major restructuring program targeted largely at Europe, setting the stage for a potential turnaround.
Fortunately, Ford has taken proactive measures that paint a promising future for investors. The company has exited or downsized unprofitable ventures, shifted its attention to profitable prospects such as its commercial business, and placed emphasis on popular trucks, SUVs, and off-road vehicles, such as the Bronco.
Moreover, Ford is ramping up its Model e business unit, which is centered on electric vehicles. Although this narrative demands patience from investors, a substantial part of its growth could stem from the BlueOval City Battery Electric Vehicle plant set to open in Tennessee next year. Ford aims to turn a profit in its Model e unit by the end of 2026, potentially offsetting projected EV losses of $4.5 billion in 2023.
Image source: Ford Motor Company presentation.
Meanwhile, Ford is leveraging its manufacturing adaptability to boost production in strategic areas. For instance, the company recently announced a two-thirds reduction in jobs at its Michigan plant, responding to softened EV demand for the F-150 Lightning. Some of these workers will transition to a nearby facility, where Ford is integrating a third crew to ramp up the production of the more profitable Bronco and Ranger.
Ultra-Cheap Dividends
Amid Ford’s transformative journey and pursuit of its EV strategy, investors have offloaded the stock en masse. This presents an opportunity to acquire shares of this Detroit icon at a meager price-to-earnings ratio of seven. Coupled with a current dividend yield of 5.2%, this presents an attractive proposition for income-oriented investors.
For those unconvinced of the potency of dividend reinvestment, consider the difference between Ford’s sole price return against its total return when factoring in dividends.
Undoubtedly, Ford has encountered challenges relative to its peers and requires significant efforts to improve manufacturing efficiency, streamline vehicle design, lower warranty costs, and navigate the acceleration of its EV initiatives.
Nevertheless, Ford stands as an ultra-cheap dividend stock, offering a 5% yield, representing an enticing opportunity for investors to capitalize on today while awaiting its resurgence.
Before buying stock in Ford Motor Company, consider this:
The Motley Fool Stock Advisor analyst team has outlined the 10 best stocks for investors to buy now, and Ford Motor Company did not make the cut. The 10 selected stocks have the potential to yield substantial returns in the coming years.
*Stock Advisor returns as of January 22, 2024
Daniel Miller has positions in Ford Motor Company. The Motley Fool has no position in any of the mentioned stocks. Learn more about The Motley Fool’s disclosure policy.
