The two major U.S. auto makers, General Motors (GM) and Ford (F), have come a long way since the Great Recession.

The economic downturn of 2007-2009 was a scary time. The escalating financial crisis nearly brought the entire auto industry to the brink of collapse.

While Ford made it through the recession, GM ended up declaring bankruptcy, and was eventually rescued by the U.S. government.

Nevertheless, the two auto makers have made a great deal of progress in the years since.

Both companies successfully managed their debt levels, returned to profitability, and have resumed paying dividends to shareholders.

Neither stock is a member of the Dividend Achievers, a group of 271 stocks with 10+ years of consecutive dividend increases.

But, GM and Ford are both high-yield dividend stocks.

This article will discuss which major auto stock is the more attractive between the two.

Business Overview

Winner: GM

Investors might still have bad memories from the depths of the financial crisis, but GM and Ford are in a much better place now.

Both companies racked up excellent results in 2016.

Last year, GM’s revenue rose 9.2%. Adjusted earnings-per-share increased 21.9%.

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Source: January 2017 Global Auto Industry Conference, page 2

GM sold 10 million vehicles in 2016, a 1.2% increase from 2015.

Cadillac was a major growth driver for GM last year. Cadillac vehicle sales increased 11% in 2016.

It also generated a 40-basis point improvement in adjusted gross margin.

For GM, 2016 was a banner year across the board. It set company records for revenue, adjusted earnings-per-share, and adjusted return on capital.

To be sure, Ford had a great year as well—just not quite as great as GM.

Revenue rose a much more modest 1.5% in 2016. Pre-tax profit fell 2% for the year.

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Source: Q4 Earnings Presentation, page 9

Ford’s global market share fell by 10 basis points for the year. It is doing very well in the U.S., led by its flagship F-series pickup trucks.

The F-Series has been the best-selling pickup for 40 years, and the best-selling vehicle in the U.S. for the past 35 years.

Last year, General Motors generated $14.3 billion of auto operating cash flow, up 43% from 2015. Operating cash flow amounted to 8.5% of 2016 revenue.

Meanwhile, Ford generated $6.4 billion of auto operating cash flow for the year, down 12% from 2015. Operating cash flow represented 6.7% of automotive revenue.

As a result, GM is better at turning revenue into operating cash flow. This gives it the edge when it comes to business model strength.

Growth Prospects

Winner: GM

GM and Ford are taking different paths for the future.

While a portion of Ford’s plan for future growth involves improving its operations overseas, GM is reducing its international footprint.

GM recently announced that it would effectively exit the European market, by selling its Opel and Vauxhall brands and its European financial arm, to France’s PSA Group for roughly $2.3 billion.

Ford is sticking it out in Europe, even though international operations have proven to be volatile for U.S. auto makers.

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Source: Q4 Earnings Presentation, page 18

The international markets are highly competitive, and margins are low. Ford had a great year in Europe last year, but its performance there is expected to deteriorate in 2017.

Ford expects lower profits in Europe due to a combination of higher costs, and the economic impacts of the Brexit vote. This will weigh on the company in 2017.

GM believes the sale will allow it to strengthen its core domestic business. With the proceeds, GM can further invest in its key U.S. growth initiatives, like advanced technologies.

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Source: January 2017 Global Auto Industry Conference, page 6

Both companies are forging ahead in new automotive technologies, but GM appears to be more active than Ford in this area.

GM has over 12 million connected vehicles.

Separately, GM is making big strides in driverless vehicles, after it acquired autonomous vehicle startup Cruise Automation last year, for $1 billion.

Lastly, GM invested $500 million in ride-sharing service Lyft.

Meanwhile, Ford has invested in shuttle-van startup Chariot, but it is available in just two cities so far. The company intends to have a fully-autonomous vehicle in ride sharing or the ride handling services, but not until 2021.

This could give GM a big lead in new automotive technology.

For 2017, GM expects adjusted earnings-per-share of $6.00-$6.50, which would make for another year of solid growth. Ford expects earnings and cash flow to decline, as it accelerates investment in strategic growth priorities.

This should help Ford catch up to GM in technology, but GM has staked itself out to a noticeable lead.

Dividend Analysis

Winner: Ford

GM has displayed more impressive growth in recent periods than Ford, and the trend may continue in 2017.

But one area where Ford maintains a distinct advantage is dividends.

GM and Ford are both strong dividend-paying stocks. GM currently pays an annualized dividend of $1.52 per share. This works out to a hefty 4% dividend yield.

But Ford does even better. Its current dividend yield is 4.8%. Ford stock provides roughly 20% more income than GM, dollar-for-dollar.

Not only that, but Ford has also committed to distributing a special dividend each year, if the company performs well.

Last year, Ford declared a special dividend of $0.40 per share, on top of its $0.60 per share annual dividend.

In 2017, the company announced a smaller special dividend, of $0.05 per share. Still, in terms of total dividends, Ford offers a yield that exceeds 5%.

Ford’s significantly higher dividends give it a clear edge in this category.

Final Thoughts

The U.S. auto makers are both strong dividend stocks. And, with cheap valuations, both GM and Ford look like tempting buys.

Investors appear overly pessimistic when it comes to GM and Ford. The threat of higher interest rates and higher oil prices is offset by improving balance sheets and strong profitability.

Between the two, it is a difficult choice. On one hand, GM’s stronger financial performance last year make it the better pick for growth investors.

It is no surprise to see that legendary investor Warren Buffett is a GM investor.

On the other hand, Ford has a much higher dividend yield, and a stated commitment to paying special dividends each year.

As a result, Ford gets the nod as the better dividend stock of the two.