What is the best buy right now? Ford, GM, Tesla

[JSH]

Originally Posted by Fat Charlie

I would submit that a company losing money or barely making a profit, yet paying a nice dividend is more fundamentally flawed than Tesla, who makes a profit despite spending like a drunken sailor. Maybe that's why their stock price is so high- despite investing every dime they make or can borrow back into themselves, they post a profit.

Tesla has yet to show a yearly profit. In 2018 Tesla structured there big spending items to hit their books in the first 2 quarters. Then they showed a small profit in the second half of the year. They repeated the same pattern in 2019. Maybe 2020 will be different but to date they are losing money.


Ford’s low profit in 2019 can be attributable to 2 major one time events

1. They completely botched the new Explorer launch causing massive reworks and 25% lower sales because they didn’t have vehicles to sell

2. They paid out a $500 million signing bonus to UAW workers to sign another 4 year contract.

[Fat Charlie]

Tesla loses money because they're building factories and inventing batteries, not because they're bad at what they do.

Per Forbes:

Ford shares have fallen 1.3% in the past year, 44% in the past 5 years, and, astoundingly, 64% in the past 20 years. Ford has paid out $10.06 billion in common stock dividends in the past 3.5 years, a period in which the company’s equity market capitalization has declined by nearly $20 billion, from $56 billion to the current level of $36.8 billion

The dividend is not supporting Ford's share price. Paying out $10 billion to produce a $20 billion diminution in equity value is not sound financial strategy, to say the least.

A dividend that comes at the cost of reducing your stock's value is a pretty bad idea. GM paid dividends until a few months before their bankruptcy- a bankruptcy that Ford avoided by borrowing early, waiting for the other two to dissolve, then using the threat of bankruptcy to extort a restructuring of that debt. Both are models that should not be emulated. Basically, aside from shuffling money around to line their own pockets, they suck at what they (ostensibly) do.