Most Profitable Automobile Companies of 2016 (HMC, TM)

Investors in automobile stocks have not seen much profit as the share prices for most vehicle manufacturers closed on Aug. 19, 2016, below their starting prices for the year. Taking the dividend into consideration makes three auto manufacturers profitable, and one eked out a teeny profit based on share price.

Determining the most profitable automobile companies of 2016 is done on a total return basis. The dollar value of year to date (YTD) gain or loss in share price is added to the annualized dividend to determine a theoretical total return figure for comparison. The percentage of the return is the total return number divided by the opening share price for 2016.

Honda Motor Co. Ltd. (NYSE: HMC) makes the Civic, which, according to Motor Trend, is the second-best-selling car in the United States. It manufactures all Civics sold in the United States in Greensburg, Indiana or Alliston, Ontario.

Honda started the year at $30.99 per share. It closed on August 19, 2016, at $30.63 per share for a loss of 36 cents per share. Honda’s annual dividend is 87 cents per share, making the profit per share 51 cents. This yields a profit of 1.65%. Honda is the most profitable automobile stock YTD.

Toyota Motor Corporation (NYSE: TM) makes the top-selling car in America, the Camry. According to Auto News, the Camry is also the most American-made car, with 75% of the value of its parts and assembly made in the United States. Manufacturing plants in Lafayette, Indiana, and Georgetown, Kentucky, make Camrys.

Toyota stock shows a small drop YTD, falling from $121.46 to $119.62. Adding in the $3.64 dividend, it has a total return of 1.48%.

Tesla Motors Inc. (NASDAQ: TSLA) does not pay a dividend. Stock price alone gives it a total return of 0.71%. The stock has been up as much as 19.84% this year.

Tesla is more a speculative technological play than an automotive manufacturing investment. Honda’s total revenue for its last fiscal year is $129.9 billion. Its net income of $4.74 billion exceeds Tesla’s total revenue of $4.0 billion. Honda has a price-to-earnings (P/E) ratio of 16.78. Tesla does not have a P/E ratio as it lost $888.66 million in its last fiscal year. Honda’s market cap is $55.2 billion, and Tesla’s is $33.31 billion.

The merger with SolarCity Corporation (NASDAQ: SCTY) and construction of the Gigafactory are moves by Tesla to change its identity from an electric automobile to a renewable energy company that has electric cars as one of its product lines. It could be a winning strategy considering the plans by a variety of German luxury car manufacturers to sell competing electric vehicles.

General Motors Company (NYSE: GM), the beneficiary of a federal bailout in 2008 and bankruptcy in 2009, is solidly profitable with 2015 net income of $9.6 billion. However, the biggest of the big three regarding revenue has a YTD total return of only 0.12%. Analysts are not looking favorably at GM as its P/E ratio is 4.08. No other automobile companies have positive YTD total returns.

Taking the perspective of a buy-and-hold investor and forgetting about stock pricing, while only looking at the dividend yield, presents a different picture. The No. 1 most profitable automobile company of 2016 is the maker of Mercedes-Benz cars, Daimler AG (OTC: DDAIY). Daimler has a current yield of 5.27%. It is followed by the Ford Motor Co. (NYSE: F) at 4.87%, GM at 4.82% and Nissan Motor Co. Ltd. (OTC: NSANY) at 3.74%.

The prediction for U.S. automobile sales in 2016 is 17.5 million units. This would be one of the best sales years ever. However, market analysts are not smiling on manufacturing stocks. GM trades at a P/E ratio of 4.08 with a current yield of 4.48%, and Ford trades at a ratio of 5.84 with a yield of 4.87%. Both companies are in stable financial positions to maintain the dividend payments over time. This represents a substantial opportunity for buy-and-hold dividend investors.