Investing in dividend stocks can be a savvy way to fortify your investment portfolio. Not only do they provide investors with regular income, but they also offer a buffer against stock price volatility. Research has shown that over time, dividend-yielding stocks tend to outperform non-dividend-paying ones.
When you come across an ultra-cheap dividend stock with substantial potential for upside, it can lead to exceptional results. In this context, Ford Motor Company (NYSE: F) stands out as an enticing ultra-cheap dividend stock presenting an opportunity for investors to make a purchase today.
Turning the Tide
There’s no denying that Ford faces an arduous road to recovery. The company’s lackluster financial performance over the past year has disappointed investors, prompting it to undertake a substantial effort to lower warranty costs, streamline vehicle design and complexity, and enhance its scale. As part of its major restructuring program, with a primary focus on Europe, Ford is potentially on the cusp of a turnaround.
Moreover, Ford has taken steps that augur well for investors. By divesting or downsizing unprofitable ventures, such as in Brazil and India, the company has redirected its attention to more lucrative prospects, including its commercial business and popular trucks, SUVs, and off-road vehicles like the Bronco.
The iconic Detroit-based automaker is also ramping up its Model e business arm, which concentrates on electric vehicles. Patience is key for investors here, as a substantial portion of its expansion may result from the launch of the BlueOval City Battery Electric Vehicle plant in Tennessee next year. Nevertheless, Ford aims to achieve profitability in its Model e unit by the end of 2026, a development that would be a significant boost for a company projecting electric vehicle losses to surge to a staggering $4.5 billion in 2023.
Image source: Ford Motor Company presentation.
In the interim, Ford is leveraging its manufacturing flexibility to accelerate in strategic areas. For instance, the company recently announced a reduction in the workforce at the Michigan plant responsible for producing the F-150 Lightning, in response to lower demand for electric vehicles. Some of the affected employees will be relocated to a nearby facility where Ford is adding a third shift to escalate the production of the more profitable Bronco and Ranger.
Ultra-Cheap Dividend Deal
Amidst Ford’s efforts to navigate its turnaround initiatives and forge ahead with its electric vehicle strategy, investors have offloaded the stock en masse. This provides an opportunity for investors to snap up shares of the venerable Detroit automaker at an incredibly low price-to-earnings ratio of seven. Furthermore, with a current dividend yield of 5.2%, it’s an enticing prospect for income-oriented investors.
Consider the impact of reinvested dividends on the difference between Ford’s price return compared to its total return with dividends factored in.
There’s no denying that Ford has lagged behind its industry peers lately, and the company has significant ground to cover in its efforts to revamp its production and design processes, curtail warranty expenses, and decide the optimal pace for its electric vehicle program.
Nonetheless, Ford presents itself as an ultra-cheap dividend stock yielding 5%, ripe for the picking while its turnaround efforts gradually take hold.
Is investing $1,000 in Ford Motor Company a good move right now?
Prior to considering an investment in Ford Motor Company, factor in the following:
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Daniel Miller holds positions in Ford Motor Company. The Motley Fool holds no positions in any of the mentioned stocks. The Motley Fool abides by a disclosure policy.