What are we looking for?
Sustainable dividends from the deepening embrace of electric vehicles.
The screen
How soon pain at the gas pump will ease is unclear. More certain is that high gas prices have revved up the global shift to EVs.
Vehicle makers face key challenges in the near term, especially from supply-chain issues including computer chip shortages. Still, huge order backlogs for their existing and upcoming EV models – and the power to raise selling prices to offset higher production costs – will drive their future gains.
Neither segment-leader Tesla Inc. nor EV startups pay dividends. Still, other established automakers now actively expanding their electric-car offerings do. Moreover, they have a solid base of current production to tap today’s demand.
Our search started with a list of global automakers with strong EV prospects, as well as the financial strength to pay sustainable dividends. We then applied our TSI Dividend Sustainability Rating System. It awards points to a stock based on key factors:
- One point for five years of continuous dividend payments – two points for more than five;
- Two points if it has raised the payment in the past five years;
- One point for management’s commitment to dividends;
- One point for operating in noncyclical industries;
- One point for limited exposure to foreign currency rates and freedom from political interference;
- Two points for a strong balance sheet, including manageable debt and adequate cash;
- Two points for a long-term record of positive earnings and cash flow to cover dividends;
- One point if the company’s an industry leader.
Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.
More about TSI Network
TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor, and the TSI Dividend Advisor. TSI Network is also affiliated with Successful Investor Wealth Management.
What we found
Our TSI Dividend Sustainability Rating System generated six stocks. Dearborn, Mich.-based Ford Motor Co. has already launched its Mustang Mach-E electric car and has begun production of its F-150 Lightning EV truck.
Japan’s Toyota Motor Co. has been a leader in gas/electric hybrid vehicles for years. Now, it’s poised to roll out a wider lineup of EVs over the next few years. Likewise, Japanese rival Nissan Motor Co. Ltd. is also investing billions, including in battery technology, to build on the success of its Leaf sedan, which was one of the first mass-market EVs. It now plans to launch its Ariya SUV this fall, with many more vehicle models to follow.
Another Japanese auto maker, Honda Motor Co. Ltd., is teaming up with General Motors Co. The arrangement will let Honda use GM’s upcoming Ultium EV batteries as well as its basic EV platform on Honda’s own EVs over the next few years. Meanwhile, GM aims to launch a new series of EVs next year but hasn’t yet reinstated its dividend.
Netherlands-based Stellantis NV was formed last year when Fiat Chrysler Automobiles merged with Groupe PSA and its French Peugeot and Citroën brands. Stellantis has major EV vehicle and battery programs under way, with launches set for the next couple of years. And finally, Germany’s Volkswagen AG – with its brands also including Audi, Bentley, Bugatti, Lamborghini, Porsche – is committed to being an EV-focused auto maker and will expand to a full line of vehicles over the next few years.
We advise investors to do additional research on any investments we identify here.
Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.
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