Speculative play on F?

[Kerim]

I've got about 200 shares of F I'm holding long in my DG portfolio. Not sure it is a "forever" stock, but I am optimistic in the medium term that they'll grow the dividend nicely and the share price should follow. I'm not really interested in more long shares, but as I've said, looking to play around with the options and think F is a good leap candidate.

If you don't have any yet, could be a good non-core holding. Though I am less sure about today's prices. It was more of a no-brainer back at $9 per share with a P/E of 4.

[ronn38]

I was looking at Ford and I'm interested in some insights from you all.

Ford of course cuts it's dividend in 2007, but prior to that, hadn't raised it for a spell (Morningstar only goes back 10 years so...). The payout ratio is a nice 14%, but I'm not sure they have much incentive to raise their dividend, especially if they are struggling in Europe, etc. It seems to be this is a play on the market value of the stock going up; which indeed it may, but that's a whole different ball-game than we usually play here;-)

Are we assuming any company with that low a payout ratio will raised dividends to attack buyers to the stock, is that the play? I think the company has a future and will be around for many more years... but I guess this, at least to me, seems like a gamble.

Ronn

[Kerim]

(12-26-2013, 10:25 AM)ronn38 Wrote: Are we assuming any company with that low a payout ratio will raised dividends to attack buyers to the stock, is that the play? I think the company has a future and will be around for many more years... but I guess this, at least to me, seems like a gamble.

Hey Ronn. As far as playing F with options, I consider it a complete gamble. I'm playing a hunch with just a few dollars for fun and education. I'll be pleased if I turn a profit, but no biggie if I lose. I did pull the trigger, by the way, on the Jan 2016 call $15.00 strike for $2.43. My "thesis," if you can call it that, is just that they are going to sell a lot more cars than anticipated, which will cause some better than expected earnings reports and share price increases. There are a thousand ways I could be wrong.

As far as buying F shares outright as a good dividend growth stock, I would not buy it today. I did buy 200 shares of Ford back in July 2012, for less than $9 per share. They had real earnings, and it had a big margin of safety then in my mind, and I figured they would grow the dividend aggressively at least in the short to medium term, so I jumped in with a small position. I believe in the company and still think the dividend will grow nicely from here, so I am happy to hold those shares as part of my dividend growth portfolio. I'll keep a close eye on it, though, perhaps even with some trailing stops. I doubt it will be a hold forever position like KO or JNJ. With the share price up a lot and recently reduced guidance, though, I wouldn't buy it today as a dividend growth stock. There are plenty of other fish in the sea!

[ronn38]

Thanks- always helpful to see how others are thinking through their strategies. I still feel new to this in many ways.

Ronn