Ford Motor Company (F): Time to Buy or Sell?

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There are a lot of factors that go into buying and selling stocks. I’ve had friends and family call me recently with questions about the market’s record high. Some are nervous about investing more money right now, and I understand their hesitation. My advice to them is to plan for the long term and invest in companies in booming or recovering industries, with excellent management and financial stability. Does Ford Motor Company (NYSE:F) represent those qualities?

Ford Motor Company (NYSE:F)

Ford has also had a recent run-up over the past few months, giving some a reason to take profits. Does that leave Ford as a buy or sell right now? Let’s take a look at those qualities, and others, that show Ford is a buy.

Management was confident enough in its sales projections and cost-cutting programs to double the dividend it pays out — $0.40 a share annually. The yield now sits at about 3%, which is above its competitors. What’s more, the 3% increases the interest in a different type of investor.

“The implied 3% yield now opens the stock up to an entirely new investor class,” Jefferies & Co. equity analyst Peter Nesvold said. He also notes that income managers “look for a 4% to 5% yield typically before initiating a new position” but “might accept a 3% yield if they believe there is sufficient share price appreciation.” He added: “We think Ford now meets these criteria.”

That’s great news for Ford Motor Company (NYSE:F) and its investors, and a doubling of the check that Ford writes its investors each quarter is also a nice perk.

Product quality
The Fusion, Focus, Fiesta, and Taurus show that Ford is making quality, fuel-efficient vehicles that will compete with Toyota and Honda for U.S. market share. Recently, Ford won six categories in the U.S. News & World Report “Best Cars for the Money” rankings. That was the most of any automaker, followed by Toyota, and also represented the majority of the nine awards the domestic automakers received total.

Source: Ford.

This quality is paying off, and the projected resale value of 2010 Ford and Lincoln vehicles increased by roughly $1,300 per vehicle compared with the 2009 models. That’s the largest increase in the industry for full-line auto manufacturers. Why the increase in value? Simple: Because people actually want to buy these vehicles, and not just because Ford Motor Company (NYSE:F) dished out large incentives to sell its vehicles.

Less debt
Ford has done a great job paying down its massive debt incurred from its highly unprofitable years. Not only has it repaid all $23 billion of its 2006 loan, but it also has significantly less automotive debt than people realize. When people look at the statements, they see about $90 million in debt and might be shocked at the high level compared with those if its competitors. They don’t realize that it’s much more complicated than that. Ford’s finance division accounts for about $72 billion of that debt. This debt is actually good! Its finance division brought in a profit of $1.7 billion last year by dishing it out to consumers at a higher interest rate. That amount almost offset 2012’s losses in Europe entirely. Ford’s automotive debt accounts for only about $13 billion, which is a very small number compared with past debt levels. Consider that between 2006 and 2008, Ford lost more than $30 billion.

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