Magna International (TSX:MG) is a leading auto parts manufacturer based in Canada. It is one of the largest Canadian companies and was recognized in the Forbes Global 2000 in 2022. The company generates around 46% of revenue from North America and 43% from Europe. Thus, this company represents a unique diversification play for Canadian investors seeking true global exposure to the auto and electric vehicle (EV) sectors.
While Magna is certainly a massive Canadian company, I feel as though this stock doesn’t get the attention it deserves. Let’s dive into why
Keep reading the article to know why Canadian investors must not sleep on Magna stock.
A company with strong fundamentals
Fundamentals are extremely important for long-term investors to consider when thinking about which companies to put in their portfolio. Magna’s recent results show promise, with the company reporting a 7% increase in sales tied to global light vehicle production increases. The company’s diluted earnings per share surged to $0.94 from $0.33 a year prior, signalling the sort of strong margins investors want to see.
This strong earnings and cash flow picture has allowed Magna to continue to provide investors with strong dividend income. The company announced a $0.48 per share dividend to be paid to investors on March 8. This dividend, which currently yields 3.5%, is just one of the many reasons long-term investors own this stock. Indeed, as a total return play, Magna appeals to investors seeking both capital appreciation and income. Thus, it’s a total return stock I think is relatively overlooked, especially considering its size.
Strong dividend-growth potential
In addition to the company’s current distribution, investors may want to consider Magna’s historical dividend growth profile. The company has raised its dividend each year since 2009 (the Great Recession) and is expected to continue to provide similar growth moving forward.
The company’s revenue growth rate of nearly 13% outperforms nearly 70% of its competition in this sector. Additionally, the company’s earnings-per-share growth rate is above average, signalling plenty of fundamental momentum to drive further dividend increases over time.
Bottom line
Overall, Magna stock represents a unique opportunity for Canadian investors to generate relatively high returns in the long run. The company promises to deliver higher dividends and focuses on increasing its year-over-year growth. Hence, Canadian investors — that is, those who see a bright future for the overall auto and EV sectors — must not sleep on Magna stock, and consider this company at its current level right now.
