One of the most controversial investments I’ve made in my retirement account since joining InvestorPlace has been in Ford Motor Company (NYSE:F). I picked up Ford stock less than a year ago, at about $10.90 per share, calling it the best defensive play in the market.
Since then, I have picked up 35 cents per share in income and the shares are up slightly, the opening price on April 6 being $11.35 each.
Remember. I didn’t pick this up for capital gains. I’m 63. I’m looking for safety and cash. The Ford dividend comes to 5.36%, even at current prices. (My basis is slightly lower thus my yield is higher.)
The only thing I need worry about is the safety of that dividend. Ford declared a “special dividend” of 13 cents per share in January, indicating they think the base rate is pretty safe.
Dividend Still Good
Analysts expect Ford stock to be able to keep affording that dividend. Earnings are expected to come in at 41 cents per share when they’re announced April 25, on revenue of $37.3 billion.
The company is not growing, on either the top or bottom lines, but it’s hanging in, and when you are seeking income that’s all you need care about.
The Ford F-150 truck has annual sales of roughly $41 billion, one-fourth of Ford’s total revenue, and it’s highly profitable. The Administration’s efforts to kill pollution and mileage standards give it breathing room, as does the continuing appetite for big iron.
Ford changed drivers last year, installing former Steelcase CEO and Michigan athletic director Jim Hackett in its big chair. He talks about putting batteries in the big trucks, making them hybrids, and of producing self-driving vans carrying up to 10 people, a “chariot system” that people around the world will go for.
While Wall Street still expresses disappointment with Ford and remains unimpressed by the “Ford Uncovered” plan announced in March, doubling-down on SUVs and trucks, Hackett’s reputation is as a deal-maker who understands technology.
Ford Still Can Grow
The exit of two “Silicon Valley” executives hired by predecessor Mark Fields may be seen as indicating Hackett has no clue about the future, and the shares have remained depressed. My own view is more sanguine. Hackett is clearing the decks for a deal that will bring Ford technology in exchange for production capacity.
If I’m right, Ford could be gearing up for an announcement delivering serious upside.
The whole autonomous car game has been portrayed as a race between Detroit and Silicon Valley. But what if the two sides cooperated? The Waymo unit of Alphabet Inc (NASDAQ:GOOGL) has been looking at joint-ventures to produce self-driving cars, rather than becoming a car company itself.
Even if Waymo goes off with another car producer, that kind of option remains open for Ford, and Hackett is the kind of man who can make that deal.
Ford has been moving away from passenger cars, killing the Taurus, the Fiesta, and possibly the Fusion, in favor of the new trucks and SUVs.
Hackett doesn’t see a future in gas-powered cars, driven around cities, and he may be right. My speculation is he’s preparing to deliver a line of electric models, with self-driving technology and some Silicon Valley street cred.
The Bottom Line on Ford Stock
Even if Hackett has no surprises in store, Ford stock is earning its dividend twice-over. It is increasingly focused on the U.S. market, making it less vulnerable to a trade war than rivals, a safe-haven from one.
If the U.S. economy doesn’t entirely collapse, my Ford investment should be fine. If Hackett can surprise, so much the better.
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 firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in F.