Yahoo Finance Does Magna International Inc. (TSE:MG) Have A Place In Your Portfolio?
Over the past 10 years Magna International Inc. (TSE:MG) has been paying dividends to shareholders. The company currently pays out a dividend yield of 3.0% to shareholders, making it a relatively attractive dividend stock. Does Magna International tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
See our latest analysis for Magna International
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is their annual yield among the top 25% of dividend payers?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has the amount of dividend per share grown over the past?
Is is able to pay the current rate of dividends from its earnings?
Will it have the ability to keep paying its dividends going forward?
Does Magna International pass our checks?
The current trailing twelve-month payout ratio for the stock is 19%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 19% which, assuming the share price stays the same, leads to a dividend yield of 3.1%. Furthermore, EPS should increase to $7.04.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. In the case of MG it has increased its DPS from $0.18 to $1.32 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Relative to peers, Magna International generates a yield of 3.0%, which is high for Auto Components stocks but still below the market’s top dividend payers.
Next Steps:
With these dividend metrics in mind, I definitely rank Magna International as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three essential factors you should look at:
Future Outlook: What are well-informed industry analysts predicting for MG’s future growth? Take a look at our free research report of analyst consensus for MG’s outlook.
Valuation: What is MG worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether MG is currently mispriced by the market.
Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
