Electric Vehicles Are Just the Thing to Recharge Ford Stock

Ford (NYSE:F) just introduced new electric vehicles (EV) for the American market and Ford stock got a little bump on the news. The automaker, which recently stopped selling most of its sedans and small cars in the U.S., has re-entered the hybrid market and introduced a plug-in model on one of its more popular vehicles.

ford stock f stock

This brings Ford closer to peers who have moved ahead of the company in the development of hybrids and electrics. It could also serve as the spark needed to again interest investors.

The Ford Escape

On April 2 Ford debuted its 2020 model Ford Escape. It will offer both a hybrid model and a plug-in version of its SUV. The plug-in model will achieve a full charge on a Level 2 charger in around 3.5 hours.

Also, the company has “targeted” a range of about 30 miles for electric-powered driving. Ford also plans to introduce an all-electric SUV-crossover model that they claim holds a range of 370 miles. However, the company released few details on this specific vehicle.

Still, we do know that this returns the Escape Hybrid to the market after Ford introduced it in one generation and discontinued hybrids in the next. It also brings Ford into an EV market where it has lagged peers such as Tesla (NASDAQ:TSLA), GM (NYSE:GM), and Toyota (NYSE:TM).

Hopefully, the stock will also benefit. One of the many headwinds facing F stock involves falling behind in the EV market. Now, with the 2020 Ford Escape, it addresses at least one of the critical challenges facing the company.

The Dividend and Ford Stock

Still, a key question revolves around how investors will react. The Ford stock price has risen steadily since December. However, at around $9 per share, it has only just begun to increase from its lowest levels since just after the financial crisis.

It also leaves its forward price-to-earnings (PE) ratio at 6.7. Analysts predict an average earnings growth rate of only 3.8% per year over the next five years.

F stock has not traded at an average PE ratio higher than 12 over the last ten years. Consequently, I do not expect Ford to achieve high multiples anytime soon. However, the average PE over the previous five years has come in at 9.85. Analysts project earnings of $1.19 per share for this year. This would imply a price of $11.72 per share.

Reaching that price would take the equity higher by about 30% from current levels. InvestorPlace contributor Luke Lango discounts future earnings and projects a 2019 price target of $11 per share. Hence, two different approaches yield the same result—Ford should trade higher.

Moreover, even if the company’s EV rollout does not move Ford stock, investors will still reap one key benefit—dividends. Ford’s current annual dividend of 60 cents per share yields almost 6.7%. Admittedly, Ford has shown a history of adjusting the payout based on current cash flows.

The dividend has fallen from a high of 85 cents per share in 2016. Still, if Ford’s EVs or its popular line of trucks increases profits, I expect this payout will rise over time.

Final Thoughts on Ford stock

Investors now wonder if the move into EVs will stimulate Ford. Since Ford will offer hybrid and plug-in models on the Escape, the company has addressed an area where it lags behind its peers. But will this help F stock?

Ford has risen in recent weeks. Still, despite a 6.7 forward multiple and an almost 6.7% dividend yield, F stock remains cheap. Company financials indicate that Ford should reach $11 per share. Moreover, even if rising to that price takes time, investors benefit from a generous payout which Ford can afford.

Hence, between the multiple and the payout, Ford is a win-win whether or not EVs recharge its stock.

As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting.

Article printed from InvestorPlace Media, https://investorplace.com/2019/04/move-electric-vehicles-ford-stock/.

©2021 InvestorPlace Media, LLC