If you want to build long-term wealth, investing in high-quality value stocks could prove to be one of the best strategies. While growth stocks often steal the spotlight, undervalued stocks with strong fundamentals can provide solid returns, dividend income, and long-term stability.
Right now, some top dividend-paying stocks on the Toronto Stock Exchange are trading below their true potential due mainly to short-term challenges, creating a great opportunity for long-term investors with $1,000 to put to work. In this article, I’ll highlight two value stocks that could be excellent long-term buys, offering solid upside potential.
Magna International stock
It’s not just an ordinary auto parts maker; Magna International (TSX:MG) stands out as a global force in mobility innovation. This Aurora-headquartered company designs and manufactures everything from body structures and powertrains to seating systems and even complete vehicles. With operations in 28 countries and deep partnerships with most large automakers, Magna continues to play an important role in shaping the future of transportation.
Right now, the stock trades at $55.15 per share, with a market cap of $15.6 billion. It also offers a solid 4.9% annualized dividend yield, making it attractive for income-focused investors.
While MG stock has dropped 30% over the last year, much of these losses were driven by industry-wide challenges, including lower vehicle production and higher input costs. But even with those headwinds, it continues to deliver stable results.
In its third quarter of 2024, Magna’s sales came in at US$10.3 billion, reflecting the slowdown in global auto production. However, the company’s profits from operations jumped by 30% YoY (year over year) to US$700 million due partly to deferred revenue recognition from Fisker.
Despite short-term challenges, Magna is continuing to focus on electrification, active safety, and automation, key areas expected to drive the auto industry’s future. At the same time, the company is cutting costs and ramping up new vehicle programs, which should improve its revenue and profitability in the coming years. With these strong fundamentals, Magna looks like a solid long-term buy for investors seeking value.
OpenText stock
And that brings us to OpenText (TSX:OTEX), a top company in enterprise information management. The company helps businesses manage and secure their information across cloud and on-premises platforms.
Currently, OTEX stock trades at $39.77 per share with a market cap of $10.5 billion. For those who like a little extra cash flow, it also offers a 3.8% annualized dividend yield. But in the last year, the stock has faced pressure, dropping nearly 28% due to macroeconomic concerns and a slower tech spending environment.
That said, OpenText is still delivering solid results. In its latest quarter ended in December 2024, the company posted US$1.34 billion in sales, with its cloud revenues growing 2.7% YoY. Its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) came in at US$501 million, reflecting a healthy EBITDA margin of 37.6%. During the quarter, the company also generated US$307 million in free cash flow, showing strong operational efficiency despite challenging market conditions.
As OpenText continues to double down on cloud, artificial intelligence, and cybersecurity, its long-term financial growth outlook remains strong, which should help its share prices rebound sharply in the coming years.
