Is Magna International Stock a Buy for its 4.4% Dividend Yield?

Besides its 4.4% dividend yield, Magna’s solid fundamentals and long-term growth prospects make its stock really attractive for long-term investors.

| More on:
Investor wonders if it's safe to buy stocks now

Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

One of the largest global automotive suppliers, Magna International (TSX:MG), has disappointed investors in 2024 so far. Despite a booming TSX Composite benchmark, which has gained more than 19% year to date, Magna stock has fallen 22%, leaving some investors scratching their heads. After these losses, MG stock now trades at $61.30 per share with a market cap of $17.6 billion. On the positive side, the recent weakness in the stock has raised its annualized dividend yield to 4.4%.

But does Magna stock’s higher yield really signal a buying opportunity or a red flag? To find the answer to this question, in this article, let’s take a deeper dive into the company’s financials, growth prospects, and dividend stability, which could help you decide if it’s a good buy for your portfolio.

As rapidly rising interest rates in the post-pandemic era affected consumer spending and auto production, Magna started facing challenges.

In the most recent quarter, which ended in September 2024, the Canadian auto parts giant reported a 3.8% YoY (year-over-year) drop in its total revenue to US$10.3 billion due mainly to a 4% decline in global light vehicle production. Notably, regional production challenges, including the 6% YoY drop in North America and China vehicle production, played a key role in this contraction.

Other negative factors, including higher income tax rates, reduced equity income, and lower sales, also pressured Magna’s profits, driving its adjusted quarterly earnings down by 12.3% YoY to US$1.28 per share. These are the key factors that have been hurting investors’ sentiments, leading to a selloff in MG stock of late.

Created with Highcharts 11.4.3Magna International PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

But here’s what boosts Magna’s long-term growth outlook

Despite the near-term challenges, Magna has several factors working in its favour that could drive strong financial growth in the long run. The company is actively striving to benefit from the automotive industry’s gradual transition toward electrification and autonomous driving technologies. Magna’s continued investment in its electrification and active safety businesses reflects its strategic shift to align with the evolving needs of large automakers across the globe. These segments are likely to play an important role in shaping the future of mobility, giving companies like Magna a competitive edge as the industry shifts its focus toward electric and self-driving vehicles.

In addition, Magna’s efforts to improve operational efficiencies are showing promising results. In the September quarter, the company posted productivity and efficiency improvements, especially at its underperforming facilities. Despite higher costs, these optimizations and higher customer pricing are helping the Canadian mobility technology firm offset some of the pressures from declining sales.

Is Magna stock a buy for its 4.4% dividend yield?

Magna recently announced its plan to buy back up to 10% of its public float through a normal course issuer bid, reflecting its management’s confidence in the company’s financial health and future prospects.

While you may find many other fundamentally strong Canadian stocks with higher dividend yields, Magna’s robust cash flow generation and strong long-term growth prospects make its 4.4% dividend yield worth considering right now.

Should you invest $1,000 in Hamilton U.s. T-bill Yield Maximizer Etf right now?

Before you buy stock in Hamilton U.s. T-bill Yield Maximizer Etf, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Hamilton U.s. T-bill Yield Maximizer Etf wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Jitendra Parashar has positions in Magna International. The Motley Fool recommends Magna International. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Dividend Stocks

I’d Put $15,000 in These 3 Dividend-Growth Champions for Increasing Income Potential

Want to offset some volatility? Here are three defensive dividend-growth champions that can generate a juicy yield right now.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

Transform Your TFSA Into a Cash-Creating Machine With $7,000

Discover how the Tax-Free Savings Account can be your golden goose for generating cash without losing your investment.

Read more »

monthly desk calendar
Dividend Stocks

How I’d Invest $10,000 in Canadian Value Stocks for Monthly Dividend Income

A $10,000-diversified portfolio of value stocks focusing on dividend safety, yield, growth, and payment schedules can provide a reliable source…

Read more »

a person watches a downward arrow crash through the floor
Dividend Stocks

Is This Correction Your Chance? Top 4 Canadian Dividend Stocks on Sale

Stocks may be down, but now is your chance to get some of these top dividend stocks on sale.

Read more »

Confused person shrugging
Dividend Stocks

Where to Invest $2,500 in the TSX Today

These TSX stocks offer attractive dividends and a shot at decent upside on a rebound.

Read more »

Pile of Canadian dollar bills in various denominations
Dividend Stocks

Invest $25,000 in These Dividend Stocks for $1,956.66 in Annual Passive Income

Dividends stocks can make a huge difference, even if shares don't move an inch. And these might be the best.

Read more »

Pile of Canadian dollar bills in various denominations
Dividend Stocks

Got $5,000? 5 Income Stocks to Buy and Hold Forever

These income stocks have a solid dividend-payout history that can help you earn stress-free passive income.

Read more »

grow money, wealth build
Dividend Stocks

Why I’d Invest $10,000 in This Undervalued Dividend-Growth Stock for Decades of Income

This undervalued dividend stock offers a high yield of over 8% and can help you earn more than $200 in…

Read more »