Should You Buy Magna International Inc (TSE:MG) For Its Dividend?

Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Over the past 10 years, Magna International Inc (TSX:MG) has returned an average of 2.00% per year to shareholders in terms of dividend yield. Should it have a place in your portfolio? Let’s take a look at Magna International in more detail. See our latest analysis for Magna International

How I analyze a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• Is it paying an annual yield above 75% of dividend payers?

• Does it consistently pay out dividends without missing a payment of significantly cutting payout?

• Has dividend per share amount increased over the past?

• Is its earnings sufficient to payout dividend at the current rate?

• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

TSX:MG Historical Dividend Yield Jun 11th 18

Does Magna International pass our checks?

The company currently pays out 19.34% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. However, going forward, analysts expect MG’s payout to fall to 15.19% of its earnings, which leads to a dividend yield of 2.04%. However, EPS should increase to $7.16, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again. In terms of its peers, Magna International produces a yield of 1.97%, which is on the low-side for Auto Components stocks.

Next Steps:

Taking into account the dividend metrics, Magna International ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three key factors you should look at:

1. 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.

2. 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.

3. 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 pass 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.