There are two ways to make money on a stock. You can buy it and hope it goes up. Then you can sell it and pocket the difference (after paying capital gains tax, of course). Or you can buy a stock that pays a dividend. Every quarter, the company will send you a check equivalent to the latest dividend per share multiplied by the number of shares you own.
For instance, let’s say you own 100 share of Ford Motor Company, whose most recent dividend for the 4th quarter of 2017. The company declared a dividend of $0.15 per share, so you will get a check in the mail for $15.00. Assuming you own Ford for the entire year and the dividend is the same every quarter, you will receive $60.00 during the year. Divide that by the amount you paid for the stock to determine your return on investment for the year.
Here is a list of the best automotive stocks from TheStreet. At the present time, it looks like this:
You might be surprised to see Tesla way down at the bottom of the list. Isn’t that the hottest stock of all the auto companies? That depends. Tesla is deeply in debt and won’t be paying dividends any time in the foreseeable future. It is also selling for a substantial premium over its book value.
Why? Because people have great faith in Tesla’s CEO, Elon Musk. He says Tesla will be the world’s first trillion dollar company and he could be right — some day. If you bought Tesla when it issued its first shares 10 years ago, you would have increased the value of your investment by a factor of 10.
That’s pretty remarkable. Very few companies have stock valuations that have increased 1000% in the past decade. On the other hand, the stock was selling for nearly $380 a share a few months ago. Today it is down to around $300 a share — a loss of more than 20% in just a few months.
For those interested in investing, CMC Markets offers investors a variety of sophisticated investment tools that permit the savvy trader to do more than just buy a stock and hold it. For instance, there is the contract for difference (CFD) that allows you to leverage the difference between the bid price and ask price of a stock to make a profit.
Use it to experiment with CFD techniques in real time. If you like what you see and wish to create an actual trading account.
There are major changes coming to the automobile business both in the US and globally as companies transition to making plug-in hybrid and battery electric cars. Some old line companies may falter while new companies may appear. Change creates new opportunities for making money in the stock market.
This post is supported by CMC Markets; images from StockSnap