Saturday, February 6, 2016

Watch List: Honda Motors

Good morning,

I promised when I reviewed Ford Motor Company that I would be following up with a few other auto companies to see which one would rein supreme and I am a man of my word. Next up and the final of the big auto companies that pay dividends is Honda Motors. 

Let's begin:

Honda Motors - (HMC): 

Honda Motors as many people know specializes in the manufacture of automobiles under the Honda and Acura branding - cars, trucks, motorcycles, ATVs, and watercraft. The company was started in Tokyo, Japan in 1946 and has been a world contender in the auto industry ever since. In addition to their lines of automotive products, they also sell power products such as generators, lawn equipment, and household equipment as a back product.

Historical data:

Honda Motors has a very strong history of company prosperity. They have had an annual growth over the last five years of 13.83% EPS, 9.21% revenue, and have increased their dividend by 18.29%. Although these numbers are very good, their cash flow remains unstable. Year after year they show considerable change in their cash flow but have remained at least in the positive numbers. In addition, their income only had a small fall in 2012 but they quickly recovered and steadily raised again in 2013, 2014, and 2015. In relation to the other auto manufacturers, Honda has stayed much in line with them when it comes to their stock price except for the one exception, Tesla. The big difference for Honda from the others such as F, GM, and TSLA is that while in the last 52 weeks, they have fallen over 20% and become super discounted, Honda has only fallen 18.69%. They appear to be holding their value a little more than the others. 

Honda Motors as it stands now:

Regardless of the strong history Honda holds, what matters currently is the now. Right now, Honda is trading at a fair price of $26.01/share which could easily be seen as a discount off its normal price. The 52 week range is $25.97-36.44 which puts the current price right over its current floor. The P/E ratio also stands as a solid bargain at 10.53x and they have passed their ex-dividend date of 12/28/2015. Because Honda typically pays dividends out quarterly, we should expect another ex-dividend date in the very near future, possibly in late February or early March. As we are a dividend investing bunch, the thing that should matter most after these numbers come together is what their dividend payout is and how long it has been providing them. Honda currently holds a 3.48% annual dividend payout but has only been raising their dividend for the past two years consecutively and they have had numerous gaps in their history of paying dividends at all. 

To watch or not to watch:

In summary, Honda Motors appears on multiple levels to be a very stable and reliable stock. Their share price is very fair and they're definitely at a discount currently that would make any dividend monster want to take a bite out of them. I only struggle with this stock because of their historically unsure dividend payouts. Although their yield is very fair, it's unsure when gaps will arise again or when they will simply change the amount for better or for worse. With this in mind, it's clear that Honda is here to stay in the world of large auto manufacturers. I however will place them on the hold category on the watch list because I wouldn't feel comfortable even for a bargain price placing my bets on them continuing to pay dividend payouts. 

No comments:

Post a Comment