Yahoo Finance Magna International Inc. (TSE:MG) Pays A US$0.45 Dividend In Just Four Days
Readers hoping to buy Magna International Inc. (TSE:MG) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Magna International's shares before the 12th of May in order to be eligible for the dividend, which will be paid on the 27th of May.
The company's next dividend payment will be US$0.45 per share, on the back of last year when the company paid a total of US$1.80 to shareholders. Based on the last year's worth of payments, Magna International has a trailing yield of 3.0% on the current stock price of CA$77.02. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Magna International can afford its dividend, and if the dividend could grow.
View our latest analysis for Magna International
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Magna International's payout ratio is modest, at just 31% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Thankfully its dividend payments took up just 49% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Magna International's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. So we're not too excited that Magna International's earnings are down 3.6% a year over the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Magna International has lifted its dividend by approximately 14% a year on average.
The Bottom Line
From a dividend perspective, should investors buy or avoid Magna International? Magna International has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Magna International's dividend merits.
On that note, you'll want to research what risks Magna International is facing. Case in point: We've spotted 1 warning sign for Magna International you should be aware of.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
