Dollar Weakness Helps Dividend-Paying Multinationals: 4 to Buy Now

Investing

Published: March 22, 2016 9:50 am

Last Updated: January 13, 2020 11:40 am

One thing that all the great management and product ideas in the world can’t help is currency strength, and for the past year the dollar has marched steadily higher against other foreign currencies. That march has proved to be a big drag on the earnings of some of the top companies in the S&P 500. Fortunately for many, the recent dollar weakness has helped to alleviate some of the headwinds, and while we won’t see the euro at $1.30 to the dollar again any time soon, the current level is helping.

We screened the Merrill Lynch research universe for big multinationals that the firm has rated at Buy and that also could be benefactors in the recent weakness. Obviously energy and materials stocks are doing better, but we looked for blue chip multinationals that pay solid dividends.

Ford

This company posted record North American results last year, and Wall Street wasn’t that impressed as huge profits didn’t meet estimates. Ford Motor Co. (NYSE: F) has reshaped the company’s product line in recent years, and sales have been outstanding. With sales booming not only in the United States but in China, and six new models being introduced in Russia, the company is expanding market share while maintaining a competitive pricing structure. 2016 could be another banner year for the gigantic automobile and truck manufacturer.

The iconic F-150 truck remains the top-selling truck in America, and it has been the top-selling vehicle for the past 34 years, despite strong challenges from the competition. While consumers have bought vehicles in a big way in recent years, replacement continues as low interest rates, dealer incentives and increasing take-home pay make a vehicle purchase an easy choice.

The company announced a very conservative 2016 outlook by region and also a supplemental $1 billion dividend for shareholders back in January. Some on Wall Street may view the North American estimates as light, but the stock has been mauled so bad, any disappointment looks priced in. With over 40% of sales overseas, the lion’s share in Canada, the weaker dollar should be a big help.

Ford investors receive a very rich 4.4% dividend. The Merrill Lynch price target for the stock is $16. The Thomson/First Call consensus target is $15.69. Shares closed most recently at $13.66.