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February 2, 2017 | Daimler spends big to compete with Tesla

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel (www.venablepark.com) Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog: www.jugglingdynamite.com

Technological advancement is coming fast and furious today, especially in the areas of energy and transportation.  This is exciting but it will also require a lot of capital investment to make these transitions.  That means less corporate profits and excess cash for non-productive rents like share buybacks and dividends.  More reasons not to pay today’s extreme multiples for share ownership.  See:  Daimler spends big to compete with Tesla:

Management expects revenue and profit to increase again this year, thanks to ongoing growth in China and Europe, a recovery in other emerging markets and a fresh model lineup. Crucially, though, the German industrial giant isn’t counting on growth in the free cash flows that fund its big dividends.

The key reason: heavy investment in future technologies, namely electric powertrains, self-driving features, web-connected cars and the smartphone-enabled car-hailing or carpooling services pioneered by Uber. Last year Daimler’s investments, including spending on plants and equipment and research and development, totaled €13.5 billion ($14.56 billion)—8.8% of sales and 16% ahead of the 2015 level. This year spending is expected to rise a further 13% to €15.2 billion, and stay at that level in 2018.

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February 2nd, 2017

Posted In: Juggling Dynamite

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