Börse Express – Mercedes-Benz stock: At a P/E of 5 and a dividend of 9%, a bargain?

Börse Express – Mercedes-Benz stock: At a P/E of 5 and a dividend of 9%, a bargain?


Stock markets have been in a bad mood for months. Stock prices have been falling since the beginning of the year. The good times of constant price increases, as we have seen since spring 2020, are over for now.

But the next bull market is sure to come. The only question is when and how far stock prices will fall before then. Some stocks are already very cheap relative to earnings. There are many examples, especially among car manufacturers.

Auto stocks continue to decline

Since the part also creates Mercedes Benz group-Aktien (WKN: 710000) is no exception.

Since the beginning of the year, the Mercedes share price has fallen by almost 20% to 54 euros (as of October 6, 2022). That’s pretty low when you look at earnings per share. Because in the last financial year, the group made a profit of 10 euros per share. So you are currently paying only 5.4 times the annual profit.

The dividend yield is high as well. Mercedes-Benz paid 5 euros per share this year, ie half of the profit. If the dividend is kept constant next year, you can expect a return of over 9%!

The big gain was not a one-time stroke of luck. In the first half of the year, Mercedes was able to increase earnings per share slightly to EUR 6.17.

And the group also has hope for the second half of the year. Sales for the entire fiscal year are expected to be above last year’s level. And income before interest and taxes should at least rise a little.

But let’s get back to the real question: Are stocks the business right now? At least that’s what the price-to-earnings ratio and dividend show.

Is Mercedes-Benz stock really a bargain?

Well, when stocking cars, it’s important to remember that this is a cyclical industry. In many cases, the purchase of a new car can be postponed for a few months or even years. In a recession, sales figures therefore come under pressure quickly. And with declining sales, profits quickly evaporate due to high fixed costs.

A look at the years before the pandemic shows how profits fluctuate dramatically. At that time, for example, the earnings per share fell from EUR 9.61 in the financial year 2017 to only EUR 2.22 in the financial year 2019. It was only last year that the sudden turn to great profits came. But that should be attributed mainly to the good mood of the whole industry. Because even with most competitors, profits are increasing.

In the long run, Mercedes stock will probably at least be able to look forward to a decent dividend. But whether the stock price will bring such joy remains to be seen. In the past, the segment was at least not one of the top flyers. Over the past five years, for example, the price has been difficult to move.

Item Mercedes-Benz shares: a business with a P/E of 5 and a dividend yield of 9%? appeared first Motley Fool Germany.

Our best stocks for 2022

There’s one company whose name is getting a lot of buzz from The Motley Fool analysts these days. It is for us The best investment for 2022.

You can also benefit from it. To do that, you first need to know everything about this unique company. So now we have one free special reports compiled, which introduces this company in detail.

Click here to download this report now for free.

Dennis Zeipert does not own any of the shares mentioned. The Motley Fool does not own any of the stocks mentioned.

Motley Fool Germany 2022