February 8, 2023

Castlow

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Seven automaker stocks challenging Tesla’s dominance with electric vehicles

What are we looking for?

Automakers with sustainable dividends that are chipping away at Tesla’s share of the electric vehicle (EV) market as new U.S. tax credits favour more affordable offerings.

The screen

Top EV makers are gaining on Tesla – notably, new U.S. registrations of Tesla cars slipped to 65 per cent of the total number of new EV registrations for the first nine months of 2022. That’s down from 71 per cent in 2021 and 80 per cent between 2018 and 2020.

Tesla’s loss – also demonstrated by its depressed share price and most recent vehicle delivery numbers, which failed to meet projections – has been traditional automakers’ gain. They are best placed to capitalize on significant EV tax credits ushered in under President Joe Biden’s Inflation Reduction Act.

The consumer tax credit – targeting cars under US$55,000 and trucks or SUVs under US$80,000 – takes effect this year and favours the lower-priced vehicles of General Motors, Toyota and other legacy automakers assembled in North America.

Neither EV startups nor segment leader Tesla pay dividends. But other automakers now actively expanding their EV offerings do. Moreover, they have a solid base of current production to meet today’s demand even if EV sales unfold more slowly than expected.

Our search started with a list of global automakers with strong EV lineups 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 non-cyclical 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 is 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

Seven automakers challenging Tesla’s share of the electric vehicle market



Ranking* Company Ticker Div. Sustain. Rating Points Div. Yld. (%) Mkt. Cap. (US$ Bil.) 1Y Ttl. Rtn. (%) Recent Price (US$)
1 Stellantis N.V. STLA-N Above Average 8 7.9 45.7 -26.0 15.06
2 Ford Motor Co. F-N Above Average 8 5.0 47.0 -50.6 12.01
3 Honda Motor Co. (ADR) HMC-N Above Average 8 4.1 39.8 -20.4 23.49
4 Volkswagen AG (ADR) VWAGY Above Average 8 3.2 81.9 -46.3 16.79
5 Toyota Motor Corp. Ltd. (ADR) TM-N Above Average 8 3.0 193.3 -31.1 137.19
6 General Motors Co. GM-N Above Average 8 1.0 48.0 -47.2 34.69
7 Nissan Motor Co. Ltd. (ADR) NSANY Above Average 7 0.7 12.4 -38.6 6.32

Source: Dividend Advisor

Our TSI Dividend Sustainability Rating System generated seven automakers – all with EVs eligible for the new U.S. tax credit. Dearborn, Mich.-based Ford Motor Co. F-N has already launched its Mustang Mach-E electric car and its sold-out F-150 Lightning EV truck. Japan’s Toyota Motor Co. TM-N, the world’s largest automaker, 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, fellow Japanese rival Nissan Motor Co. Ltd. NSANY 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. In late 2022 it launched its Ariya SUV, with many more models to follow. Another Japanese automaker, Honda Motor Co. Ltd. HMC-N, has teamed up with Detroit’s General Motors Co. GM-N. The arrangement is letting Honda use GM’s Ultium EV batteries as well as its basic EV platform on its own EVs. Meanwhile, GM has already released its Bolt EV and SUV and aims to keep launching new EVs this year and beyond. Netherlands-based Stellantis N.V. STLA-N was formed in 2021 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 VWAGY – with its brands Audi, Bentley, Bugatti, Lamborghini and Porsche – is committed to being an EV-focused automaker and will further 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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