The TSX index has a wide variety of dividend stocks across multiple sectors. But just a handful of these stocks are worth investing in right now. One TSX dividend stock that has created massive wealth for long-term shareholders in energy giant Suncor (TSX:SU).
Valued at a market cap of $66 billion, Suncor stock has returned 191% to investors since April 2004. However, after adjusting for dividends, total returns are much closer to 368%, outpacing the TSX index, which has returned 356% in this period.
Despite this outperformance, Suncor stock offers shareholders a forward yield of 4.2%, given its annual dividend payout of $2.18 per share.
Is Suncor stock undervalued?
Suncor is a Canada-based integrated energy company. Its operations include oil sands development, offshore oil production, and petroleum refining. Additionally, Suncor develops petroleum resources and owns Petro Canada, a retail and wholesale distribution network.
Despite a challenging macro environment, Suncor reported adjusted funds from operations of $13.3 billion in 2023, allowing it to return $2.8 billion to shareholders via dividends and $2.2 billion in buybacks.
Suncor completed asset sales worth $1.8 billion and acquired the remaining interest in Fort Hills for $2.2 billion. It ended 2023 with a net debt of $13.67 billion, up $683 million year over year. The TSX energy giant is well capitalized and generates enough cash flows to service interest payments, reinvest in capital projects, enhance shareholder wealth, and target acquisitions.
However, Suncor is part of the energy sector, which is highly cyclical. An uptick in oil prices has allowed Suncor stock to surge close to 25% in 2024. Alternatively, Suncor remains vulnerable if oil prices move lower amid slower consumer spending and a sluggish global economy.
Priced at 10 times forward earnings, Suncor stock is quite cheap but trades lower than consensus price target estimates. Here’s one blue-chip TSX dividend stock I’d buy over Suncor today.
Is Magna International stock a good buy right now?
Valued at $19.7 billion by market cap, Magna International (TSX:MG) pays shareholders an annual dividend of $2.56 per share, translating to a forward yield of 3.7%. Magna International is an ancillary automobile company that supplies systems and components to major original equipment manufacturers globally.
Magna’s operating results are dependent on the levels of car and light truck production of its customers, primarily in North America, Europe, and China.
In 2023, Magna International reported revenue of $42.8 billion, an increase of 13% year over year. Comparatively, global light vehicle production rose by 8% year over year last year. In addition to vehicle production, Magna sales rose due to new program launches and acquisitions, partially offset by labour strikes in the fourth quarter (Q4) of 2023.
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Due to higher sales and margins, Magna International’s adjusted earnings before interest and tax increased to $2.2 billion, up from $1.7 billion in the year-ago period. Similar to several other companies, Magna focused on operational excellence and cost initiatives as well as productivity and efficiency improvements, in the last 12 months.
The auto giant paid $522 million in dividends in 20223 and increased the payout by 3% to $0.475 per share in Q4. Magna International has now raised dividends for 14 consecutive years.
Priced at eight times forward earnings, Magna stock is 28% below consensus price target estimates.
