High Yield for Investors: Volkswagen Doles Out Generous Special Dividends
Let's Dive into the Volkswagen Investment Prospect:
What's the Deal with Volkswagen?
Volkswagen, Germany's popular name in the automotive industry, has recently captured headlines following the spin-off and IPO of Porsche AG and the announcement of a mouthwatering special dividend of 19.06 euros per share. But is it the right time to jump in or merely seize this special reward?
Volkswagen's Business Model in a Nutshell:
Volkswagen, a household name in Germany, is well-recognized in the global market. Let's break down the criteria that matter most to investors.
Volkswagen's Stock Performance Scorecard
Despite all the positive buzz, it's the numbers that truly count for shareholders. Here's a rundown of Volkswagen's performance:
Performance: The recent turbulence, including the diesel scandal and ongoing strikes, has resulted in a negative return of 16% over the past five years. Preferred shares have fared slightly better with a 6.1% gain.
Dividend Continuity and Increase: Volkswagen boasts a dividend yield of 6.25%, offering a better picture than the slumping share performance. The company has been steadily boosting its dividends since the diesel scandal in 2015/2016, with a special dividend scheduled for January 2023.
Free Float: The free float, a factor often overlooked by investors, is far below 50% at Volkswagen, making the risk of takeovers and squeeze-outs less likely.
Valuation: Volkswagen's P/E ratio of 3.9 suggests a significant discount to its potential earnings, attracting many potential buyers, but only under certain risk scenarios.
News Situation: The Porsche IPO, while initially looking like a flop, has recently seen a surge, with the company's shares gaining ground. VW’s upcoming move regarding its own share price could add fire to the Porsche rally.
Future of the Business Model: Volkswagen's success in the electrification era remains uncertain. Some question the company's speed in catching up with Tesla and BYD, while others question the influence of the state and works council in shaping the company's direction.
The Final Verdict on Volkswagen's Share
Volkswagen scores 5 out of 10 in our ranking. This German giant has its pros and cons. In the short term, the Porsche IPO, upcoming special dividend, and positive sentiment could make an investment worthwhile. However, in the long run, Volkswagen's profitability and ability to succeed in the EV market will determine its future.
Pros:
High Special Dividend: Volkswagen plans to pay 19.06 euros per share, resulting in a dividend yield of 14.2% based on the current share price.Low Valuation: The current P/E ratio of 3.9 indicates that the stock is significantly discounted and potentially a bargain if earnings stabilize or grow.Porsche IPO Context: Spin-offs can unlock subsidiary value, but it remains uncertain whether the current valuation fully reflects such spin-offs.
Cons:
Dubious Performance: The recent turmoil, including the diesel scandal and labor strikes, has weakened Volkswagen's returns over the past five years.Risky Future: The execution of China's "in China, for China" strategy and the ramp-up of EV production require flawless execution to meet 2026 targets, and tariff volatility could considerably impact margins.
A Final Disclaimer:
Please confirm whether the special dividend is definitively confirmed in upcoming filings, as unannounced payouts could change the risk-reward ratio. Happy investing!
- Volkswagen announced an appealing special dividend of 19.06 euros per share, creating an attractive short-term investment opportunity.
- The dividend continuity and increase at Volkswagen, including a steady boost since the diesel scandal, present a more promising picture compared to the slumping share performance.
- Despite the positive sentiment surrounding Volkswagen's business model and recent developments like the Porsche IPO, the long-term profitability and success in the electrification era remain uncertain.
- Personal-finance investors must carefully consider the pros and cons of investing in Volkswagen, taking into account the high special dividend, low valuation, and implications of the Porsche IPO, while also evaluating the company's questionable performance and risky future.
- It is essential to verify in upcoming filings whether the special dividend is definitively confirmed to ensure that the investment decision is based on an accurate risk-reward ratio.
