Valued at a market cap of $14.3 billion, Magna International (TSX:MG) is a global automotive supplier that operates through four segments: Body Exteriors & Structures, Power & Vision, Seating Systems, and Complete Vehicles. The company manufactures a range of automotive components, from body systems and chassis technologies to advanced powertrain solutions, including electric vehicle (EV) systems, batteries, and complete vehicle assembly services.
Today, Magna stock is down almost 60% from its all-time highs and offers shareholders a dividend yield of 5.3%. Should the beaten-down TSX dividend stock be on your watchlist right now?
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Is the TSX dividend stock a good buy?
Magna International stock has grossly underperformed the broader markets in the last decade. Since May 2015, the TSX stock has returned -24% to investors. Even if we adjust for dividend reinvestments, cumulative returns are less than 1%.
Magna International reported first-quarter (Q1) 2025 results that exceeded internal expectations, with consolidated sales of $10.1 billion, adjusted EBIT (earnings before interest and tax) of $354 million (3.5% margin), and adjusted earnings per share of $0.78. Despite an 8% year-over-year sales decline compared to a 3% drop in global light vehicle production, the company demonstrated strong incremental margins on higher sales.
Magna explained that it faces tariff-related challenges, with approximately $250 million in annualized direct tariff exposure after accounting for 75-80% of parts that are already USMCA (United States-Mexico-Canada Agreement) compliant. Management emphasized they expect to recover 100% of unmitigated tariff costs from customers while actively working to increase USMCA compliance through design modifications and other initiatives.
Magna updated its 2025 outlook to reflect current conditions, reducing North American production assumptions by 100,000 units to 15 million while maintaining European forecasts and raising Chinese production. The revised guidance includes higher sales primarily due to foreign exchange translation from a stronger euro, offset by lower volumes in North America and slight margin reduction due to currency effects and decremental margins on volume reductions.
Magina continues to win significant new business, including a collaboration with NVIDIA for next-generation active safety systems, a complete ADAS (Advanced Driver Assistance System) with a North American original equipment manufacturer, and a dual-motor e-drive for Mercedes-Benz.
Management noted that Magna has paused its share repurchase program due to market uncertainty after buying back $51 million in shares during Q1 and paying $136 million in dividends.
Can the TSX stock recover in 2025?
Analysts tracking Magna stock expect adjusted earnings to expand from $5.41 per share in 2024 to $8.58 per share in 2029. Moreover, its free cash flow is projected to increase from $1.46 billion to $3.12 billion in this period.
Today, Magna stock trades at a forward price-to-earnings multiple of 7.4 times, lower than its 10-year average of 9.4 times. If the TSX stock is priced at 7.5 times forward earnings, it will trade around $65 per share in early 2029, 30% above current prices.
Analysts also expect the company to raise its dividend per share from $1.90 in 2024 to $2.34 in 2029. It indicates that Magna’s dividend expense in 2029 will be around $660 million, indicating a payout ratio of less than 25%.
Bay Street expects the TSX stock to surge over 11% over the next 12 months, given consensus price targets. If we adjust for dividend reinvestments, cumulative returns may be close to 16%.
