If you want to lock in a strong dividend before the market wakes up, this could be your shot. Right now, there’s a TSX stock trading well below its highs, yet it’s paying a steady 5.3% yield. I already own it in my portfolio, and I’m seriously considering buying more. It’s easy to overlook companies when they’ve had a rough few quarters, but that’s often when the best opportunities show up. The fundamentals are still there. The dividend is safe. And the stock is cheap. That combination doesn’t last forever.
In this article, I’ll walk through why this beaten-down dividend stock, Magna International (TSX:MG), still deserves a spot in your portfolio – and why I’m thinking of doubling down on it before the rebound begins.
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Still beating at the core
Magna International has seen better days, no doubt about that. But sometimes the best time to bet on a stock is when it has been left behind, especially when the numbers say it has still got a lot of life in it.
Let’s start with the basics. Headquartered in Aurora, Magna is one of the biggest auto parts suppliers in the world, working in everything from body frames and engines to seats and full vehicle assembly.
Magna stock currently trades at $51.39 per share, with a market cap of $14.5 billion. It offers a healthy 5.3% annualized dividend yield, and it’s still making those payouts quarterly.
The stock has had a rough ride lately as it’s down roughly 11% over the last year and has fallen over 30% in the last three years. While this dip might scare off short-term traders, it could attract long-term dividend investors like us – especially with the recent signs of recovery as economic conditions remain better than many had anticipated.
Short-term weakness but strong margins
In the most recent quarter ended in March, Magna’s revenue dropped 8% YoY (year-over-year) to US$10.1 billion. This decline was mostly due to a 3% drop in global light vehicle production and its program completions in North America and Europe. On top of that, the company had to deal with some major hits from its wind-down of Jaguar vehicle production and negative currency movement.
Despite these setbacks, the company actually posted strong margins and operational improvements. Also, during the quarter, Magna still managed to return US$187 million to shareholders through dividends and share buybacks.
Looking toward the rebound
Amid the ongoing macroeconomic uncertainties, Magna’s management is taking proactive steps. It’s cutting capital and engineering costs, restructuring to improve efficiency, and focusing on cash flow generation. Its 2025 outlook looks stable with projected adjusted net profit between US$1.3 billion and US$1.5 billion. Additionally, the company expects to recover 100% of unmitigated tariff costs from its customers, which should provide a cushion to its margins in the coming quarters.
Moreover, Magna is doubling down on innovation. For example, it recently partnered with NVIDIA on artificial intelligence (AI)-powered driver systems and expanded electrification projects. With vehicle production expected to bounce back soon, especially in the electric vehicle segment, Magna’s long-term investments could give it a strong edge in the long run, making this dividend-paying stock look really attractive at current levels.
