When I bought some shares of Ford Motor Company (NYSE:F) earlier this year, it wasn’t in anticipation of big capital gains. I was looking for a place to hide and F stock was a good place to do that.
I anticipated that a stupid government would lead to stupid results. While the economy has proven resistant to stupidity, that won’t persist indefinitely. Eventually stupid wins.
I bought Ford stock because I expected it to be able to maintain its 15 cents a share dividend, a fat yield of over 5% with the share price stuck between $10-$11. So far, it has not disappointed, earning 51 cents per share last quarter, and expected to earn 31 cents when it next reports earnings in October.
I also made this move because I’m 62. I could ride out a recession in growth stocks if I were 20 years younger, or even 10. I’ve done it before. But I’m moving from growth to income naturally, and Ford provides income.
What Comes Next
Ford, like other auto makers, is trying to manage two revolutions at once, autonomy and electricity.
Mark Fields, who was abruptly fired in May, seemed more focused on managing the company than in managing the environment. Jim Hackett, his replacement, had been running Ford’s self-driving car operations in Silicon Valley, and is all about the two revolutions.
Right now, it’s assumed that Silicon Valley will control it. Hackett seems to understand that the market will control the transition, that the use cases are key to adoption.
Who will buy the technology first matters, because that determines where Ford’s autonomy bets go, and how it sells. Will it be on fleets of pizza delivery vehicles? On long-distance trucks? On taxis and buses? Or might it come on cars sold to known drunk drivers or elderly drivers, whom society decides need protection from themselves?
The same questions exist with electrics. Ford is putting $4.5 billion into developing up to 13 part-electric vehicles for the 2020 market. The company has identified a niche between standard electrics and hybrids like the Prius from Toyota Motor Corp (ADR) (NYSE:TM) — the plug-in hybrid that still has a gas engine for longer trips, but uses electricity around town. Ford’s current plug-ins also cost less than competitors’ models.
Plenty of Time
My view of Ford stock is not a common one around the InvestorPlace campfire, where capital gains are the name of the game and five years from now is forever.
James Brumley thinks Hackett’s vague, philosophical talk means he’s not earning his keep. Josh Enomoto calls the stock a buy for fools. Vince Martin says it’s still not worth chasing.
I don’t entirely disagree. As I said, I didn’t buy Ford for capital gains, and the shares may indeed fall below $10 at some point.
The biggest problem facing Ford is that car sales in general are declining. As a potential car buyer myself, I sympathize. Should I buy another gas-powered car, or one that can’t get me to the hospital by itself? Should I even buy a car, or just rely on Uber and Lyft in my old age?
In the near term, Ford is looking to extend credit to new, younger buyers with a limited credit history. That’s not the same thing as getting into subprime lending. It’s focusing on young people with new jobs who haven’t been in the market before, who may have just gotten through college and know they already have a mountain of bills to climb, but are still good bets. Ford Credit is the company’s hidden gem.
The Bottom Line on F Stock
If you’re interested in capital gains from F stock, heed the advice of my fellow InvestorPlace writers. But if you have money looking for a place to hide, if you’re an income investor, or are just concerned about another investor, Ford stock’s 5.5% dividend still looks stable enough to hide in.
Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in F.
