Ford Stock Analysis (F)

Ford (F) has been a staple in the American automobile industry since the automobile’s infant stage.  The Model T was at the forefront of the revolution that helped bring the automobile to the eager middle class.   Both Ford and the industry have changed since the release of the Model T as consumers are presented with endless brands, options, customized features, and so on.  To see how the company stacks up in the broader market place, we will perform a Ford Stock Analysis by running Ford through the Dividend Diplomat Stock Screener.


Ford Stock Analysis


Ford in the News Recently

Last week Ford created headlines when the company released earnings and ultimately lowered its profit outlook.  The lowering of the guidance caused quite the sell-off and ultimately declined 10.66% during the last week.   In the article referenced at the beginning of the paragraph, the increased domestic sales could not outpace the lagging international sales and was the key component of the sell-off.  While the short-term outlook is negative, management still expects global sales to increase over the long-term as the brand continues to expand internationally and discussed this fact in the guidance release.  In addition to this news, another round of recalls were announced for Ford automobiles.  This has been an issue that has hampered the auto industry all year and it seems like a new car and model (not just Ford) are announcing a recall each week.

Ford Stock Analysis

The news was not all negative for the company this week.  It was reported that the new, re-designed Ford Fusion has closed the gap on the “gold standard” sedan over the last ten years, the Toyota Camry (Lanny argues that it’s the Honda Accord…).   Being competitive in two markets (sedan and truck- F series), would be huge for Ford domestically and could provide the company with very stong sales going forward.  Toyota will have a counter-punch, but competition historically has brought the best out of car companies.  So the news for Ford has been mixed recently.  The stock took a beating after the outlook was lowered; however, management and market analysts have provided information that could indicate Ford is taking steps in the right direction in the long-term.   Let’s take a look at Ford’s valuation compared to industry peers to assess the company’s current valuation.

 Dividend Diplomats Ford Stock Analysis

The purpose of our stock screener is to identify potentially under-valued dividend growth stocks.  It is time to run Ford through our stock screener!  For the purposes of the comparison and ford stock analysis, we will compare Ford’s current metrics versus three competitors: General Motors (GM), Honda (HMC), and Toyota (TM).

Metric #1:  P/E Ratio Less Than S&P 500

We will first look to see how Ford and its competitors are priced compared to the current market valuations.  For this Ford stock analysis, I will assume a P/E ratio of 19.5 for the S&P 500.  The market has fluctuated close to this market recently and changes slightly on a daily basis.  Based on the table below, three of the four companies are priced at a discount to the market.   It seems that the auto industry is one of the industries that is generally priced at a discount compared to the market.   Even though GM’s current P/E is above the S&P, the Forward P/E indicates the company usually trades at a ratio closer to its competitors.  Since the industry valuations are lower (for the most part),  lets take a look at Ford compared to TM and HMC. Currently, F is trading at a nice discount compared to its competitors which is a direct result of the news this week.  Before the stock declined 10.66% this week, F had a P/E ratio  of 10/12, which is much more in line with its competitors.   What a difference a week makes!

F PE Comparison

 Metric #2: Payout Ratio of Less Than 60%

For this analysis, I will use  the annualized quarterly dividend and the average estimated earnings for each company as listed on Yahoo! Finance.  As evidenced in the table below, all four company’s have payout ratios far below our ceiling of 60%.   The current dividend for each company provides a large cushion against earnings and gives management plenty of room to grow the dividend growing forward.

Payout Ratio


Metric #3: Dividend Growth

We usually will review the five most recent dividend increases for this analysis.  However, the automobile industry will force us to modify our approach since Ford and GM did not begin paying a dividend until recently, while HMC pay a different dividend each pay period.  Therefore,  I will just review Ford’s  dividend strategy.  Over the last three years, Ford has announced two dividend increases (100% and 25%). While the company still has room to grow their dividend (See Metric #2 above), the growth rates experienced over the last few years are not sustainable going forward.  After reviewing the annual report, management stated they will continue to pay and grow a sustainable dividend but I can’t imagine a 25%+ growth rate going forward.  However, a statement from management is a positive sign for the long-term dividend prospects.  Another indicator of growing dividends is the fact that the Ford family still owns a major stake in the company.  I would look for the iconic family to continue to reward itself  via dividends for the companies recent success.  I always look to see where management and the owners incentives are, and the fact that the Ford family owns a lot of stock in the company indicates to me that the dividend will continue to grow annually.   Therefore in our Ford stock analysis – the big Model T receives a positive grade for this third metric in.


In our Ford stock analysis – Henry Ford held up very well in the Dividend Diplomats Stock Screener and the metrics indicate the stock is under-valued, has room to grow its dividend, and has the incentive to do so.  However, recent news provides a major potential red flag for the company as the international market is not performing well in the current period.  Even though I discussed some positive trends for Ford in the first section above, the long-term growth prospects of the company requires a lot of things to fall into place for Ford.  Can international sales turn around?  Can the Fusion continue to eat away at the market share of the Camry?  We also can’t ignore the recent round of recalls impacting Ford and the broader automobile industry.    Due to the industry’s cyclical nature, the intense competition, and the constant wave of recalls – I am bearish on the automobile market as a whole.   Therefore, due to the questions surrounding Ford and the automobile industry, I will not be initiating a position in the company even though the metrics indicate so.   There are simply better dividend growth stock opportunities in this market for my portfolio’s current needs (VZ, GSK, PM, etc.).

Do you like Ford as a dividend growth stock?  Do you think the market was over-reacting to the recent news?  Am I too bearish on the automobile industry?  Will you be adding Ford or any of the automakers to your portfolio?



2 thoughts on “Ford Stock Analysis (F)

  1. I hold positions in F from my purchases from couple of years back. The stock rose quite a bit since then and has almost dropped back to my purchase price. I will keep monitoring and will add to my position if it drops a bit more.

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