Auto stocks can help steer you to dividends.
The 2018 Detroit Auto Show just wrapped up after welcoming hundreds of thousands of gearheads and a treasure trove of concept cars that showcase the industry’s innovation. But for all the talk of autonomous cars that drive themselves or electric vehicles that never need a visit to the gas station, investors should take notice of automakers for a more traditional reason: these corporations are cash cows for their investors. While there is no shortage of new ideas in the auto industry, it’s important to remember that many of these companies have a long commitment to returning their capital to shareholders via dividends. Here are seven car companies that offer impressive dividend potential.
Ford Motor Co. (NYSE: F)
The only one of the “big three” automakers to avoid bankruptcy during the financial crisis, Ford has done quite well in the intervening years thanks to a leaner operation and a focus on high margin pickup trucks in its best-selling F-series line. While investors lately have been concerned about weaker guidance as the U.S. auto market matures, one thing that has been encouraging is the steady rise in dividends from 5 cents quarterly in 2012 to 15 cents at present.
Current yield: 5 percent
General Motors Co. (GM)
While Ford stock softened in 2017, GM managed to stage a pretty nice rally in the second half of the year thanks to improved operations. While total vehicle volume hasn’t been impressive, better margins and higher profitability show that CEO Mary Barra has her priorities straight. Even more encouraging is that bigger profits have come even as GM invests heavily in those next-generation technologies making all the headlines. For instance, General Motors is already ahead of the game on electric vehicles thanks to its Chevy Bolt that’s priced under $40,000 and has promised a lineup of at least 20 EVs by the year 2023.
Current yield: 3.5 percent
Toyota Motor Corp. (TM)
Japanese automaker Toyota has long been at the forefront of efficient vehicles with its game-changing Prius hybrid. And that commitment to innovation has continued, with big strides on its self-driving technology — including a pledge that the 2020 Tokyo Olympics will feature an entire fleet of self-driving taxis for spectators of the games in just two years time. But for all the changes, Toyota remains as big an income machine as ever. The company only pays shareholders twice annually, but those distributions have risen from roughly $2.34 in 2013 to $3.50 last year — a nearly 50 percent increase in just four years.
Current yield: 2.7 percent
Johnson Controls International (JCI)
While perhaps not as well known as the big nameplates in the auto sector, JCI is an important supplier to the auto industry from batteries to on-board computer systems. This is a great growth industry as cars increasingly move toward electric propulsion instead of traditional combustion engines that use gasoline. It also makes door panels, trim and other components. Johnson Controls has been paying dividends since long before the automobile, however, with shareholders getting a regular paycheck as early as 1887. This means that however the company evolves, investors can be confident that dividends will keep flowing.
Current yield: 2.7 percent
Douglas Dynamics (PLOW)
Though a quirky, niche play, Douglas Dynamics is worth noting thanks to the recent cold snap. That’s because PLOW stock — as the ticker implies — is one of North America’s leading producers of commercial vehicle attachments that include snowplows. That’s not all Douglas delivers, with its Dejana division offering truck bodies for commercial use, ranging from utility crane apparatus to specialized beds for landscapers. Thanks to a robust American economy and a very good brand within this small universe, Douglas has done quite well lately. Shares are up over 200 percent in the last five years — more than double the 90 percent or so for the Standard & Poor’s 500 index in the same period — all while paying a nice dividend to boot.
Current yield: 2.4 percent
Penske Automotive Group (PAG)
While many consumers may be familiar with Penske Truck Leasing, the parent company of Penske Automotive operates traditional car dealerships and commercial truck wholesalers in the U.S., Canada and Western Europe. While it’s not a manufacturer, this $4 billion company is in other aspects of the auto sales industry, including parts and service. Dealerships have seen a downturn in the U.S. as volume has fallen, but Penske has been aggressive in tightening up its dominance, including a recent acquisition in the U.K. as well as a nearly $45 million dealership in the Miami area. These additions will ensure the dividends keep flowing, even if growth is admittedly harder to come by in 2018.
Current yield: 2.5 percent
Cummins (CMI)
Perhaps the biggest oddball pick is Cummins, the diesel engine manufacturer synonymous with big rigs and highway driving. At first glance, this stock may not initially make sense, but it’s important to remember that the electric revolution has not yet hit the long-haul trucking industry given the distance restrictions on lithium batteries. And the company’s technologies are heralded by many experts for both their efficiency and comparatively smaller emissions. Just look at the 30 percent surge in CMI stock over the last year and the juicy dividend. Cummins is doing just fine and will keep paying its shareholders reliable dividends for the foreseeable future.
Current yield: 2.4 percent.
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7 Auto Stocks to Drive Income originally appeared on usnews.com
