Ford Motor Company (F) Is Even More Attractive Now

Let us examine GM and Toyota Motor Corporation (NYSE:TM), for example. GM does not pay dividends, but its CEO’s reference to making it the most valuable company in the world is a clear indication that it is aspiring for gains in market value. And the key to achieving this is in its margin prospects. Incidentally GM’s US margins have been close to 8%. This is below Ford’s, and the gap is increasingly bothering GM followers. It is also to be kept in mind that the company is not making money in China as the small cars like Wuling, which are popular there ,are quite low on profitability. Moreover, a majority of the profits goes to the Chinese joint venture partners. However, GM’s stock does offer upsides given its solid results. The Government’s decision to divest its stake in GM, which it had acquired during the 2009 bailout, increases the faith of investors in the company’s fundamentals. However, at the current valuations together with the nice dividend yield, Ford look more appealing.

Meanwhile Toyota looks to be fairly valued, and any significant upsides are unlikely. It is true that the company has unseated GM from its position as the largest automaker in the world in 2012 and it also the most valuable auto company in terms of its market capitalization. However, it has plenty of challenges at hand. It was lucky that its announcement in January to recall vehicles from around the world did not impact its stock. There was a widespread furor over Toyota’s recalls in 2009-2010, and a repeat performance would be very undesirable, to say the least. Also, the company has yet to announce a strategy for Europe or even China. In China it has been badly affected by the boycott of Japanese cars in the second half of 2012, which caused sales of Toyota vehicles to be 25% below expectations.

If Ford was losing out somewhere on account of its low dividend yield, which was hovering around the 1.5% mark when the stock was trading around $14 and paying $0.05 in dividends, the situation seems to have corrected. Income-oriented investors and fund managers are bound to take note of this. I think that Ford is looking very attractive at its current valuations and offers significant upsides.

The article Ford Is Even More Attractive Now originally appeared on Fool.com and is written by Tina De.

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