Dana Blankenhorn, my InvestorPlace colleague, admitted in October that buying Ford (NYSE:F) a couple of years ago was a mistake, despite the fact it generates guaranteed dividend income of 60 cents a year, which works out to a yield of 7.3% for him and the other owners of Ford stock.
As long as Ford doesn’t go out of business, 7.3% beats the 10-year Treasury every day of the week and twice on Sundays. There certainly are worse dividend stock plays.
Now, don’t get me wrong, I’ve been a big skeptic of Ford stock.
In my most recent article about Ford stock, I said right up front I wouldn’t own it, but felt its bet on autonomous cars was the best way to shore up its business.
Here’s how I finished my column:
“Do I think that autonomous vehicles are a savior for Ford stock? They’re the best bet in my opinion for dragging its share price out of the basement,” I wrote. “If you’re a patient investor (five years or more), now’s as good a time as any to be buying.”
Keep the faith, Dana. Keep the faith.
The Other Options Under $10
Right now, Ford isn’t necessarily competing for investors who want to own auto stocks, but rather those people looking for high yields, low-priced stocks, and deep value plays.
I did a quick screen of stocks with market caps of $10 billion or greater yielding 5% or more with a forward P/E of 10 or less and trading under $10.
I came up with a list of six stocks. Five of them are financial services stocks, Ford is the outlier.
However, when you think of it, Ford might as well be a financial services company, given it had $104.2 billion in net finance receivables outstanding as of the end of September.
That’s a lot of Ford vehicles being self-financed. Should the economy hit the skids, Ford Credit’s business, not to mention the sale of Ford vehicles, will suffer the repercussions.
But that’s a subject for another article.
What I’m interested in determining is if Ford is the best stock to buy under $10.
From this small sample of six stocks, I don’t think there’s any question Ford is the best buy.
If I widen the number of possibilities to include stocks with a forward P/E of 20 or less, the number jumps by only one, so that’s no good. Perhaps, if I lower the dividend yield to 3% or higher, it will increase the numbers.
Voila. A 3% yield provides an additional six possibilities. However, even with 13 stocks, nine are financial stocks, another three are tech stocks, and Ford is the only consumer stock.
Perhaps it’s best if I look at Ford’s competition under $10 without any of the screening criteria mentioned above. That gives me 28 stocks.
Of the 27 stocks other than Ford, the only ones I’d be interested in are Sirius XM (NASDAQ:SIRI), CNH Industrial (NYSE:CNHI), and perhaps some of the Brazilian financials.
The Bottom Line on Ford Stock
As I said at the top, I’m not a big fan of Ford, the automaker, but I can’t help wondering if the pain Ford stock has suffered in the past two years, is slowly coming to an end.
With a yield of 7.3% and trading well under $10, it makes you wonder why Ford stock is so cheap. In fact, it might not be the worst bet you can make in 2019. After all, if it were to double somehow in 2019, you’d finish the year with a very reasonable 3.65% dividend yield and a stock in double digits.
So, yes, I think it just might be the best stock to buy under $10.
As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
