Ford stock has been in overdrive since July, rising 47% in six months. If you're hesitant to invest after this run-up, don't be; it's just getting started. Ford's latest move to ramp up investor interest was released last week, when it doubled its dividend. With its dividend now at 2.8%, it's much more enticing for income managers to jump in for investment, especially with an astonishingly low P/E ratio of 3.18 for the trailing 12 months. That's a fraction of Ford's competitors! Compare it to GM at 11.33, Toyota at 16.02, and Honda at 16.18. It's important for investors to understand what Alan Mulally's "One Ford" plan is, why it's working, and what we can expect now that its dividend has been doubled.

One Ford 
1. Aggressively restructure to operate profitably at the current demand and changing model mix.
Right now Ford's plan is to trim its number of platforms that all of its vehicles are made on, down to nine by year's end. The plan also aims to have 85% of its global sales from these platforms. Ford noted Wednesday that it recorded its 10th consecutive quarter of positive automotive operating cash flow. It goes on to mention that over the first three quarters of 2012 it increased its liquidity position by $2 billion. I'd say it's been very successful restructuring to operate profitably. 

2. Accelerate development of new products our customers want and value.
Here's sales proof that Ford is producing a vehicle consumers find appealing. It reported impressive gains, with sales of the Focus up 40%, Explorer up 16.7%, and F-Series up 10.3%. The F-Series was again the best-selling truck and the best-selling overall vehicle in the U.S., but Ford isn't a one-trick pony -- the Focus has become the No. 1 selling car globally in 2012. Ford's success with the Focus is a credit to its management understanding that fuel efficiency is the trend for the future. In accordance, it jumped in early to gain market share with its environmentally friendly vehicles. Here's what Jim Farley, Ford's executive vice president of global marketing had to say: "Focus and Fiesta represent the best of our 'One Ford' plan ... In just three years, Ford has transformed our global small car lineup and started winning over customers worldwide with vehicles that are not only fun-to-drive but also fuel-efficient - largely thanks to our award-winning EcoBoost engines."


3. Finance our plan and improve our balance sheet.
Ford's balance sheet has flipped right-side-up since the 2008 recession, allowing it to reclaim its "Blue Oval" logo it put up as leverage for loans in 2006. At one point in time, Moody's claimed Ford stock to be nothing more than "junk." Since then, it's had four years of success improving its net income, margins, and long-term debt to capitalization.

With drastic improvement in net income, you'd expect margin to follow, and it has -- jumping from 2.2% in 2009 to 14.8% in 2011. The margin improvement is due to increased operating efficiency from reducing the number of platforms used, and also needing fewer incentives to move cars off the lot with a gradually improving economy. Improving net income, with margins not far behind, has pushed earnings per share consistently higher.

Now, the biggest issue Ford has faced since the recession is its debt. In my opinion it's still a bit high, but the improvement over the last four years makes investors very confident in management's ability to spend wisely.

Who's calling it junk now?
Ford has the industry's best CEO in Mulally, who had a vision that the company has bought into and followed religiously since the recession. It's clearly nailed the three points of the "One Ford" plan I highlighted, allowing the company to improve its balance sheet enough to double its dividend. Now with the dividend doubled, cash will likely be spent for additional innovation or model renovations that will lead to better revenues and margin.

I have even better news for potential investors, it's only going to get better for Ford. Here's why: In 2012, Ford launched fresh designs of two of its best sellers, the Escape and Fusion. Reviews have been great for both, and it is so confident in the Fusion that it has bumped up production at a second factory. With two of its best sellers just getting started with a new design, and both being on efficient global platforms, look for net income to improve in 2013. With the dividend doubled, a solid company vision, great CEO, improving financials, and the trailing-12-month P/E at a fraction of its competitors, Ford still looks like a steal for your portfolio in 2013.

Want to find companies like Ford before they have 50% runs? Ford has been a longtime selection of Motley Fool co-founder David Gardner, helping lead his stock picks to gains of more than 113% in our Stock Advisor service. Make sure you start 2013 with a bang and get the inside scoop on what Motley Fool superinvestor David Gardner will be buying this year. He's crushed the market in his Stock Advisor and Rule Breakers portfolios for years, and now I invite you to a personal tour of his flagship stock picking service: SupernovaJust click here now for instant access. 

 

The article 3 Proofs Mulally's Vision Is Working at Ford originally appeared on Fool.com.

Daniel Miller owns shares of Ford. Follow him on Twitter @StreetSmartFool. The Motley Fool recommends Ford and General Motors Company. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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