Pay For Your Brand New F-150 -- One Dividend At A Time
My family drives a big black Chevy suburban.
The kind that guzzles gas at an alarming rate, and costs a small fortune to fill the tank.
Of course, lower prices at the pump have made a big difference in our family’s budget this year. It’s almost like getting a gas rebate check every time I fill up the family tank!
But today, I want to talk about another type of “rebate” that you can earn from your gas guzzler. One that you can claim yourself — whether you drive a big suburban like me or not. Let me explain…
Less than a decade ago, it was decidedly “un-American” to own a big pickup truck or SUV.
Economists were warning us about “peak oil” as recoverable oil reserves were depleted.
Environmentalists were warning us about dangerous carbon emissions that were ruining our air quality. And the U.S. relied on foreign oil from the Middle East — which came with significant risks and a very real political cost.
I remember feeling guilty when driving around in a big SUV. Even though it was the most efficient way of transporting our large, and growing, family.
But today, the tides have completely turned.
Nothing says “America” like a giant F-350 or SUV barreling down the highway. And according to the latest statistics, we’re going to see a lot more of these vehicles on the road this year…
A Definitive Shift Toward Larger Vehicles
Here in the U.S., large trucks and SUV’s are flying off the lots. And a big part of this trend is because cheap gasoline prices makes it much more affordable to drive a much larger vehicle.
And of course, those lower gas prices are due to good-old American drillers, who are now able to tap into shale reserves and produce oil at much lower costs.
That means the U.S. is less reliant on foreign oil today. And over time, America should become totally self-sufficient when it comes to producing enough oil to meet domestic demand.
Many of the other concerns with big SUVs are also improving.
For instance, better technology has led to a dramatic reduction in emissions. And that’s good news for the environment (even with bigger autos on the road). Peak oil is no longer an issue because so much shale oil is available — and because we’re steadily making progress on more efficient electric vehicles.
And when you fill up your SUV’s tank with gas, you’re no longer contributing to an unstable geopolitical environment. Instead, you’re literally creating jobs for energy workers and the many companies that thrive in U.S. drilling communities.
That’s why we’re seeing a marked shift in buying patterns for new vehicles. One that is decidedly skewed toward more trucks and SUVs:
Why Americans Will Continue to Buy Trucks & SUVs
Don’t expect the trend of larger vehicles to end any time soon.
Because in addition to cheap gasoline, there are other major factors that will continue to drive demand for large vehicles.
For starters, low interest rates continue to make large vehicles more affordable. Sure, the Fed hiked rates last month for the second time this year. But the Fed’s target rate is still just a range of 1% to 1.25%. And market interest rates for loans have barely budged.
Today, it’s more affordable than ever to buy that Tahoe, Expedition, or F-350. You don’t even need to have a quality credit score!
A second reason you’ll see more large cars on the road is because more Americans have jobs.
On Friday, the Labor Department announced that the U.S. economy added another 222,000 jobs in June. That was the largest monthly increase since February. And the number follows a trend of strong employment growth throughout this year.
More Americans with paychecks, means more Americans are able to afford new trucks and SUVs.
Keep in mind, the trucks and SUVs flying off dealership lots in the U.S. have higher profit margins than sedans and other smaller vehicles. So as Americans opt for larger vehicles, profits for U.S. automakers will continue to grow.
And that’s where our gas guzzler rebate checks come in…
Tapping Into U.S. Auto Profits
Ford (NYSE:F) and General Motors (NYSE:GM) are the two major U.S. automakers that should benefit considerably from this trend. And the best part — both of these companies stocks are extremely cheap right now, even with the stock market at all-time highs.
Ford shares currently trade around $11 per share, which equates to a reasonable 12x P/E ratio. And don’t forget about the dividends (or “rebates”). The company currently pays investors $0.60 per year for every share they own. That’s more than a 5% return guaranteed for just owning the stock.
General Motors is much of the same. GM currently trades at a dirt cheap 5.4x P/E ratio — which is even below the industry average of 8x — and pays a 4.3% dividend for just owning the stock.
As an investor, this is exactly what you want to see when buying a stock — this combination of low valuation, high dividends, and a bullish market for their products.
We’ll be keeping a close eye on the trends for oil prices, auto sales, and more. Stay tuned!
Here’s to growing and protecting your wealth!
Editor, The Daily Edge