- A PE multiple of 8, and a dividend yield of 3%, makes Toyota stock a buy.
- Toyota is the strongest Japanese car company, and a global leader.
- Toyota is like its new Prius, not a world beater but a steady performer with a future.
Face it. In the short-term you’re not going to make a lot of money in this market. When people want to sell, they sell everything.
This has been true at Toyota Motor Corp (NYSE:TM) as anywhere else. The Japan based car maker's stock price is down over 13% in 2016, and is likely to fall further when New York opens for trading on February 11.
But even at the February 11 opening price, consider what you get. Toyota stock has a Price/Earnings multiple of a little more than 8, which is lower than that of Ford Motor (NYSE:F). It delivers a yield of 3.4%, based on a dividend it can cover nearly twice over with earnings. Operating cash flow remains strong.
Then there’s the Toyota brand. The company participates in all the fastest-growing niches of the car market, and it has sold over 2 million hybrid cars, including 1.7 million units in its Prius line, since their introduction at the start of the century.
No car company is firing on all cylinders, but Toyota tends to adjust to change better than most.
In January Toyota bought the rest of small car maker Daihatsu, which made its Scion cars, pointing that company’s production toward India, and in February it folded Scion into the main Toyota line into the main Toyota line. Toyota is in the best cash position of any Japanese automaker, while pouring more into research than the others, and it is thus poised to go after other brands, like Suzuki, that fit well with its operations. Toyota is looking into creating its own ride-sharing service, upgrading the electronics in its cars, and adapting to the idea that more families will own just one vehicle.
There are currently 27 analysts following Toyota stock, and none has a sell rating on the stock. Two-thirds of them have it as a buy and those numbers have changed little in the last three months.
Toyota stock is not a snazzy one, but in a bear market like this you don’t want snazzy. You want a steady performer that is trading at a low price. An earnings multiple of 8 with a yield of over 3% is a low price. The Toyota stock could drop a little more, along with the rest of the market, before rising again.
But Toyota is now selling at the lowest prices it has seen since 2013. Accumulate it gradually, don’t punch the accelerator, and you should have as good an investment over the next decade as my family has had in its two Toyotas over the last one.