Ford (F 3.63%) has a vaunted history in the American automobile industry, with founder Henry Ford helping shape it from its early days. For years, Ford has made the country's top-selling vehicle, the F-150 pickup trick, and it earned credibility from Wall Street for being the only one of the Big Three automakers to avoid bankruptcy during the financial crisis.
However, as a stock, Ford's track record isn't particularly compelling. Here's how it has performed over the last decade against the S&P 500.
As you can see, Ford's share price is actually down over the last decade, and the stock has only generated a slight return with dividends reinvested. However, past performance on the stock market isn't necessarily correlated with future returns. Let's take a look at where Ford stands today to see if it can make you a millionaire.
Image source: Ford.
A legacy automaker at a crossroads
There's been no shortage of news out on Ford recently. For example, the automaker just revealed the impact of its new contract with the United Auto Workers.
Ford dialed down its operating income guidance for the year, now calling for $10 billion-$10.5 billion, which includes $1.7 billion in strike-related lost profits. It also said the new agreement would cost the company $8.8 billion over the life of the contract. On a per-vehicle basis, the contract is expected to cost $900 per vehicle by 2028, or about 60 to 70 basis points in operating margin. Management said it aimed to offset those costs through higher expenses and lower expenses.
In 2021, Ford stock soared along with broader enthusiasm for electric vehicles (EVs), but more recently, Ford and the rest of the auto industry have run into challenges as demand seems to be plateauing and inventory is piling up.
Ford has been losing billions of dollars in EVs as it tries to scale up to compete with Tesla and other EV makers. In the third quarter, its EV division recorded an operating loss of $1.3 billion even as unit sales were up 44% and revenue rose 26% in the division.
The company also concluded, "Many North America customers interested in buying EVs are unwilling to pay premiums for them over gas and hybrid vehicles, sharply compressing EV prices and profitability." Due to that reality, Ford is delaying $12 billion of investments in EVs.
Finally, Ford abandoned its efforts in autonomous vehicles, taking a $2.7 billion write-down last year on its investment in Argo AI, a start-up focused on this technology. Argo AI later went out of business.
NYSE: F
Key Data Points
Can Ford make you a millionaire?
At this point, more things seem to be going wrong for Ford than going right. While its core business, which it calls Ford Blue, remains strong with wide profit margins and popular vehicles, Ford's growth opportunities seem to have mostly run dry for now with the setback in electric vehicles and the collapse of its autonomous vehicles venture with Argo AI. That may not be the case forever, but it's hard to invest in Ford based on EVs or autonomous vehicle technology right now.
However, there is a silver lining. Ford has strong attributes as a value stock, trading at a price-to-earnings ratio of just 7, and it offers a dividend yield of 5.5%. That gives the stock a good shot at outperforming the broader market as it won't take much to raise Ford's valuation from its current level.
While Ford stock isn't going to make you a millionaire, it's well priced and deserves a closer look from investors, especially if you're searching for high-yield dividend stocks.
