Car companies are making better looking vehicles that are made better and perform better. As a result, the stocks are doing much better. For the last year of market action Ford Motors (NYSE: F) is up more than 24 percent. For that same period, General Motors has risen by over 14 percent. Nissan Motors (NASDAQ: NSANY) has risen more than 7.5 percent for 2014.
That certainly beats the performance during The Great Recession when the industry collapsed, with General Motors and others filing for bankruptcy.
In recent trading, car companies stocks are off, however. General Motors and Honda Motors (NYSE: HMC) have been pummeled, as has the entire sector as well for many factors. As but one example, Honda Motors, maker of the legendary Accord, is down for the last month, quarter, six months, and year of market action. For 2014, Honda Motors is off by more than 17 percent. Paradoxically, both sales and earnings per share are soaring for Honda Motors, though.
That is why this period should be looked upon as a buying opportunity in the motor vehicle sector for long term investors.
A major reason is the dividend income that these companies pay. At present, the average dividend for a member of the Standard & Poor’s 500 Index (NYSE: SPY) is just under 2 percent. The dividend yield for General Motors is 3.60 percent. For Ford, it is 3.11 percent. The shareholders of Nissan Motors collect dividends at a rate of 3.39 percent.
Moreover, there is ample cash flow to increase the dividends so that long term investors collect more in dividend payments the longer the shares of the company are owned.
Value investors should also find these automobile and truck stocks alluring. The price-to-sales ratio for Ford is 0.43. For General Motors, it is 0.34. Honda Motor has a price-to-sales ratio of 0.55. That means that each dollar of sales is priced at a discount of more than 50 percent in the shares of the stock.
Growth investors should be equally bullish as to the future prospects for car companies.
Earnings-per-share growth for the next five years is projected to be more than 60 percent for Nissan Motors. Honda Motors is expected to enjoy earnings-per-share growth of 30 percent for the next five years from sales of its automobiles and motorcycles. For General Motors, the consensus of Wall Street is that it will be 18.70 percent growth ahead during the next twenty quarters. Ford Motor is predicted to post earnings-per-share growth of 11.39 percent for the next half decade.
Income, growth, and value investors should be bullish on the motor vehicle sector based on macro trends, too.
The global economy is clearly recovering from The Great Recession. There is even good news coming out of Europe and Japan. Asia, the largest market for motor vehicles of all makes and models, continues to grow. Around the world, the consumer sector continues to expand with huge increases ahead in both size and spending. That increases the demand for cars, motorcycles, and trucks. For the long term, that will reward investors in Ford Motors, Honda Motors, General Motors, Nissan Motors, and other motor vehicle firms with a solid total return.
How do you feel about investing in the motor vehicles sector?
Kurt @ Money Counselor says
I’d like to think it’s a better time to invest in the carsharing sector! Carsharing’s putting a hit on car sales and Millennials have wised up to the high cost (and ugly environmental consequences) of owning a car, particularly in contrast to the many great alternatives now available. Also, after graduating with unprecedented levels of student debt, owning a car may simply make no financial sense for many young people!
Money Beagle says
I have some investment in Ford, though sadly I missed out on the run-up from $2 a share to where it is today (around $16). Still, I think there’s long term strength in the sector as well as a lot of insulation and protection against economic downturns, which is usually what killed the domestic automakers in past economic cycles.