Ford Motor Company (F), General Motors Company (GM): This Stock Is Speeding Ahead

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A big strike against General Motors Company (NYSE:GM) is the lack of a dividend. This forces one to rely on capital gains if they choose to invest in GM. The company has been operating smoothly, the last few quarters. The bailout created a pretty hazardous environment for any form of dividend. As General Motors Company (NYSE:GM) has basically fulfilled its obligations to repay the bailout – perhaps a dividend will appear in the future.

General Motors Company (NYSE:GM) reported similar growth patterns to Ford in its second quarter earnings call. Cash flow for GM has increased significantly. Its 2 strongest markets were North America, and Asia (as were Ford’s). Overall sales are higher for the year.

Toyota Motor Corporation (ADR) (NYSE:TM)

source: Yahoo Finance

Toyota Motor Corporation (ADR) (NYSE:TM) has been in better shape than Ford or GM the last few years (even with the recalls), mostly because it wasn’t hit directly by the turmoil of government bailouts or the US recession. It currently trades at a P/E of 19.7, which is above the industry average of 12.4. It is trading at a PEG of 0.7 that suggests, its growth is actually trading at an attractive value.

Toyota pays a dividend like Ford. It checks in with a yield of 1.63% on its current stock price, and consists of 30% of its cash payout. Its earnings have been mostly steady, as it has missed expectations only twice in the last 7 quarters.

Toyota’s earnings have seen some tailwinds, especially in the last quarter. With the yen weak, Toyota gets a boost from foreign profits. Overall, revenue increased almost 19% from the same quarter last year. With Toyota on a roll, it could be tough to keep the momentum going.

Domestic sales for Toyota are expected to decline, Toyota must try to grow further through North American sales as the US economy slowly builds steam. Toyota will continue to receive currency tailwinds, as the Yen remains weak.

The bottom line

All three companies have benefited from a recovering US economy, as the automotive industry has been on the rebound. It seems as though Ford is the best short to medium term buy of the three. It is growing at an impressive clip as management is hitting on all cylinders. With the highest dividend, a low payout ratio, and the best valuations to go along with rising sales – Ford has room to continue moving higher.

The article This Stock Is Speeding Ahead originally appeared on Fool.com and is written by Justin Pope.

Justin Pope has no position in any stocks mentioned. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Justin is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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