Dividends and Electric shock: German auto stocks get a new lease of life

Just about all investors should know about Tesla because the stock is up 650% this year, whether your own it directly or indirectly through funds, Tesla has been a superstar in stocks. When a company is successful, everyone looks to the next Tesla. We know that over the next 5 to 10 years, half the vehicles on the market will be electric, but we need to get there first. If Tesla is at the valuations it is, what other companies doing the same thing or similar things should be at the valuations approaching Tesla? Both Ford and GM have announced they are going electric and have enjoyed a rise in valuations. The biggest winners are the German auto makers of VW and BMW.

In an article from Reuters, VW competes against Toyota as the biggest vehicle in the world. VW laid out plans to have 70% of its European sales come from electric vehicles. The big plan announced by CEO Herbert Diess has resulted in the stock moving up 52% to push up the capitalization of VW to E$ 143 billion.

BMW also has plans for electric – 50% of sales to be electric by 2030 and 90% of its market categories by 2023.

UBS recently forecast VW would match Tesla’s output by 2025 and expects the share price to E$ 300 up from E$ 223.

VW owns Porsche and it is considering an IPO for Porsche to raise funds for investments in software and electric vehicles. Tesla is superior to battery technology and EV software. VW is a design and manufacturing powerhouse with vast global reach, ambition to match, ample profits and cash reserves to fund its EV drive.

Linking to dividend paying stocks, one thing you can always count on is when the stock market rewards one company others will be doing the same thing. In this example, Tesla has been the market darling for very good reasons, but time means the other companies in the marketplace are putting in investments to do the same as Tesla. There are always alternatives and when you do your homework and see what the market is rewarding you will know which names to move in and have both capital gains and dividend income.

There are more questions than answers, till the next time – to raising questions.

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