With all of the hype around electric vehicle start-ups, it can be easy to overlook tried-and-true automakers like Toyota (TM 3.80%). In this Fool Live video clip, recorded on Nov. 22, Fool.com contributor John Rosevear discusses the pros and cons of Toyota and whether it might be worth a closer look for investors.
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John Rosevear: Toyota is interesting even among the legacy automakers. It's so big. And, as an investment, it's really slow moving. There's an old phrase in investing, widows and orphan stocks, the ones you sell that's very safe. Toyota has, I think a single A credit rating, which is probably the highest among any automaker. Forward P/E is 10.05. Traditionally we say with the big automakers that slow-growing ten times earnings, it's right there. It pays a modest dividend. Its market cap is huge.
It's slow moving into EVs, too. It's been late to the party. Toyota has stuck to the line that hybrids are going to make more sense for a lot of people for the next 10,15,20 years. Then, the real mass market spaces that Toyota does a lot of its volume in. I'm not sure that's false. But, recently they are making investments in battery factories.
They've announced recently that they've got seven Toyota brand electric vehicles coming over the next three years or so, using a platform that they co-developed with Subaru. Toyota owns a stake in Subaru, and the companies are interlinked. People should know that. They continue to tinker with fuel cells. But they're counting on hybrids to pay the bills for a while. They don't have a big high-margin pickup truck business or anything like that. They do sell an awful lot of hybrids. They sell an awful lot of relatively inexpensive vehicles to people who are just looking for something they can count on for 8,10,12 years to be reliable transportation, that's Toyota's bread and butter.
They are moving slowly. I think why I ranked them in the middle is because they're less aggressive about some of these high potential growth spaces. Battery electric vehicles, autonomous driving, and so forth than some of the other big legacy automakers. But they're not going anywhere. It's Toyota. They're not going anywhere. They had something like 50% market share in Japan. They've got massive government support. They've got all these interlocking relationships with an entire supply chain. They've weathered the chip crisis better than most of their rivals because of that interlocking series of relationships. I wouldn't buy Toyota as a high-growth stock, but there's not a lot of downside here either if you want to collect that dividend.