AUGUST 8, 2019
insight has a short shelf-life. We just covered Ford. Now we’re stockjawing again. Why? Ford’s a miracle. Now is the time to recognize that–right now. Again–why? Others are beginning to catch on. Ask Adam Jonas of Morgan Stanley.
Why is Ford all the rage again, so soon? Again, it’s a miracle, even more so since Monday’s market faceplant. Ford’s Fa King dirt cheap, almost free. The dividend is sky-high, at 6.33%. And? And increasingly many believe it’s payable. And? And it’s holding up like a heavy weight champ, amid some of the fugliest conditions we’ve ever seen. Again, think Monday. Think “Dividend Glory. Ford 6.33%. If You Can Find A Cheaper Dividend, Buy It.”
caught an upgrade from Equal to “Overweight” on the 6th, from Morgan Stanley analyst Adam Jonas. Why the change? The upgrade was driven by the company’s “restructuring, strategic actions, and better product mix,” Jonas stated.
Ford’s a rare value, in turnaround mode, with the cheapest, sky-high 6.3% dividend anywhere. That’s the story we suggested in our piece “Ford. Fabulous Still?” And that’s precisely how it’s increasingly playing out.
“Our previous concerns over Ford’s ability to maintain its dividend payment have largely subsided. Our earnings outlook implies free cash flow in line with or exceeding the dividend payment.”–Adam Jonas, Morgan Stanley.
The Jonas call came four days after our piece. The analyst’s forecast now calls for “stable profitability” of $1.20 to $1.30 a share through 2022. That outlook was influenced specifically by “incremental restructuring savings.”
No mistake. Autos are a challenged industry, one which the new tranche of tariffs won’t help. Yet, the past two days have shown Ford as a market survivor, if not better. Monday’s blood bath barely touched F, down 0.5%. Tuesdays rally saw Ford up over 2%, a very big move for Ford, or any established industrial. Nice, very nice.
There’s more good news. Ford now sports an “investment Grade” credit rating from all the major credit rating agencies. But then so did entire stacks of dog crap CDO’s during the sub-prime credit crisis. There’s more. Morningstar now states that “Ford pays a good dividend that we think’s safe in a downturn, and will likely often pay a special dividend.” Morningstar Fair Value Estimate $12. Yowser.
We believe shares will nonetheless continue to drift lower, if not much lower. Shares could challenge the January low of $8.29, representing another -12.3% from the current $9.46 pre-market Wednesday. The price-action suggests both value and dividend investors are supporting the price. We’re practicing patience. This story will require time. Scaling down will continue to be our way–in wide scales.
The Investing Journey
Thanks for Reading.