Saturday, May 7, 2016

General Motors Company (GM): A Big Dividend! With Tons of Upside!!

Well it took long enough but I have been super busy but that is a good thing as things are going well. The best part I'm making money to put in my investing accounts!! As I continue to look around there are many companies not paying a dividend. I am evaluating current undervalued companies that do pay dividends. I do every now and then invest in a non dividend paying stock but I really don't like to. Now I know it is fun buying a growth company that may or may not be overvalued and I have made tons of money investing in a company like Amazon. I am mainly focused on companies who are actually giving back dividends.

To make money you have to find industries or companies people can't forgive. I am talking right now about General Motors Company (GM). We all know what happen to the auto industry back in 2008. It seems like people are still wanting to avoid these companies. I've been looking at GM and it has been in the financial news lately because of great earnings. The stock has not followed and you might say this is the top of the cycle for this company. I don't know maybe this is true. I like using and the PE ratio on adjusted (operating) earnings is only 5.9 with a normal PE of 9.8. That is so far under the valuation of Peter Lynch which is the 15x earnings. I like when you have great upside potential or if earnings fall you could have some cushion on earnings expansion. Now the new GM after the crash is only roughly 7 years old and part of the time was owned by the government which people might not of liked. This company is well capitalized now but debt levels are growing. My favorite part it has a 4.9% dividend yield. The dividend was reinstated in 2014 and in 2015 the company raised it 15% and then raised another 5.5% this year. The next ex-dividend is June 8, 2016 with a payout date of June 23, 2016.

What does worry me is GM's market debt-to-equity ration which was 118% in December of 2015. There needs to be the right balance of debt and equity to grow operations. One other worry is that GM is in a very competitive environment and a lot of money is needed for R&D.

My plan is to build a position and collect dividends I will keep you updated if I decide to sell this company. Let me know your thoughts on GM.

I have a few other companies in the next few days I am also building a position in with current price levels.

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