1 Dividend to Buy, 1 Dividend to Sell

Dividends are one of the most important things many investors consider when evaluating a stock. Ford's (F 0.66%) dividend, after recently doubling it, sits at about 3%. Tech giant Microsoft (MSFT -1.27%) has a slight edge over Ford in this category at 3.3%. 

But that doesn't necessarily mean it's the better buy. Analyst Brendan Byrnes explains below why Ford still looks attractive despite it's recent run-up. The stock trades below 10 times earnings, and has some tailwinds in the two biggest auto markets in the world, China and The United States. U.S. auto sales are still well below levels that we saw in the year 2000, and Ford has been investing heavily and gaining inroads in China. 

Microsoft, meanwhile, is a stock that analyst Andrew Tonner is bearish on. Steve Ballmer's history of poor capital allocation decisions, combined with the company largely missing the mobile revolution are two big reasons Andrew is steering clear of this stock.

Check out the video and transcript below for more on these two stocks, and the reasoning behind the bullish and bearish thesis. 

Andrew Tonner: Hey Fools, Andrew Tonner here. I'm joined today by Brendan Byrnes, our Motley Fool analyst. Brendan, let's revisit one of our popular series, "1 Dividend to Buy, 1 Dividend to Sell."

When you're looking from industrials and investor perspective, what's a dividend stock that you're bullish on today?

Brendan Byrnes: One of the stocks I follow most closely is Ford. It generates a lot of interest. It hasn't been a dividend stock for long, only about a year now, but they recently doubled their dividend. It's sitting over 3% now, and I think a lot of investors actually don't realize that because this is so new and the dividend recently doubled.

Ford has a lot of tailwinds overall. When you're talking about the U.S. auto industry I still think that there's room for growth here.

We're not near where we were around 2000, when they were selling 17 million vehicles in the United States, annually -- light vehicles -- we're about 2 million shy of that still, so there's still growth in the United States, but more importantly emerging markets, especially China, the world's largest auto market.

Ford has done a good job getting a foothold there. They fell way behind GM. They're only selling, still, about 1/5 as many vehicles in China as GM does. That also means there's room for improvement. They've invested over $5 billion in Asia, and they're going about this the right way.

Does this mean that this is a stock that doesn't have its risk? Of course not. Europe remains a problem. You have to watch that, especially when you talk about Ford. They said they were going to lose $500 million in 2012 at first, then that number got bumped up to $1 billion, then it got bumped up to $1.5 billion or more, ultimately ending at $1.75 billion.

They say they're going to lose $2 billion in Europe this year alone. Keep an eye on that, that's obviously not a good thing, but at the same time I do like Ford's turnaround plan. They're going to mirror it after what they did in the United States back after the financial collapse, so they have a blueprint. They're introducing 15 new vehicles and reducing plant capacity by 18%, which is the fundamental problem in Europe. There's too much capacity.

It's hard to close these plants, but I like what Ford's doing. They're ripping off the Band-Aid now, instead of letting this slowly bleed to death. On track for, they hope, profitability or at least break-even by mid-decade.

Investors need to keep an eye on that, but that could turn things around and that's the reason I think that Ford remains a very cheap stock when we're talking about under 10X earnings.

Andrew, that's mine to buy. You're going to sell one today. Which one don't you like?

Andrew: Yeah, this is a great dividend play, but the storyline here I think is more based on my lack of faith in the company over the long term. A capital appreciation play, and that's Microsoft, a company that's really entrenched in a lot of the main areas of technology we deal with daily.

Operating systems, of course; Windows. Windows is the dominant desktop operating system. They have application software that's hugely high margin for them, and a budding enterprise business as well, but I'm really not bullish on them on the mobile front.

The Surface, it seems like, isn't going to be the win that Steve Ballmer had hoped for. Steve Ballmer actually is a big part of this investment thesis. If you look at a CEO's responsibilities, capital allocation is a huge one and he's proven to be one of the worst capital allocators in all of tech, just squandering huge sums of money on these pointless acquisitions.

Buying Skype for billions and billions of dollars, aQuantitative was a total mess as well. Bing hasn't been the win they thought it would be, although getting into the search business was a good idea. It was poorly executed, and that's really the storyline we've seen here.

We had seen Microsoft being the dominant technology company, coming out of the late '90s. This company was sitting at the top of the game as all these big trends developed right in front of them -- things like mobile and cloud computing -- and they really haven't reacted accordingly.

They've been the entrenched giant, kind of a lumbering giant. A company that has huge cash flow generation capabilities, but am I bullish on them over the long term? No. I think there's a reason the stock's been flat for basically the better part of a decade, and that's that the company just isn't focused. It isn't willing or able to adapt to the change of the future, and that's why we've seen them basically lose mobile as well.

Brendan: All right, there you have it. One stock we're bullish on, one stock we're bearish on. Thank you, Andrew, and Fool on!