Why would somebody want to buy Ford Stock? In this currently tumultuous environment, you would think the impulse would be to take less risk, not more. The way that people are still looking at this situation however, is that since the price is low, then obviously it’s a good deal. Right?

Right???

Well, if you’re into taking risks and not necessarily seeing a return from it, then by all means go. However, there are many reasons to take a second look at why you would want to buy Ford stock before you take that plunge. For one, just because the stock price has been knocked down to levels previously unthought of, doesn’t mean now is the time to go unjudiciously scooping up deals. While the stock market is a voting instrument in the short run, it is definitely a weighing instrument in the long run. It weighs the long term prospects for what a proper valuation of the stock is based on its fundamental business prospects and potential. A long-term trend reading of Ford’s stock chart shows that this steady devaluing of its stock isn’t a new occurrence, but is something that has been consistent with Ford over the last 8 years.

What this steady devaluation of Ford’s stock (and thereby investor’s confidence in its prospects) is portraying the decreasing ability of Ford to pay DIVIDENDS. For a large blue-chip stock, being able to pay dividends is the ultimate test of the company’s profitability and strength. If you look at the median gain in stocks over the last 50 years which is approximately 9% a year, fully 4-5% of that growth is through the payment of dividends. When you consider that inflation has been averaging about 3-4% over that same 50 year period, if you take out the ability to pay a solid dividend, the prospects for return from a blue-chip company is roughly zero.

Read more Here: Don’t Buy Ford Stock!

Take this concept and place it into Ford’s current business model and prospects and you will find a company that is seriously hindered in its ability to pay dividends for a long time. Even if they are in the strongest financial position of any of the Big Three (so they claim), their massive debt load which continues to grow is going to prove an anchor to any future growth prospects. The reason for this is that if Ford does manage to again turn a profit, those profits are going to go towards paying off that debt load – not dividends. Hence, the stock owners are going to get the scraps of Ford’s business for the extent of the foreseeable future of the auto industry in the United States.

When you piece this massive debt load together with the still lack of quality products and high labor costs when compared to Honda and Toyota, it becomes almost impossible to see how Ford can dig itself out of its rut. My advice to you – Don’t buy Ford stock! If you see yourself as a market timer or gambler when it comes to stocks, then by all means go for it. However, if you’re investing for the long run, then do yourself a favor and stay away from Ford stock.

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