Canadian investors can tend to ignore undervalued stocks. I know, it doesn’t seem likely does it? You’re being shown an undervalued stock, and yet you choose to ignore it? How on earth does that happen?
Well, because we don’t have a crystal ball. There’s no way to see into the future. All we have are fundamentals, outlook, and sectors. That’s why the industrial sector continues to look like a stable area for growth, and in particular companies such as Magna International (TSX:MG).
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About MG
Before we get into Magna, let’s discuss why industrial stocks are some of the best ways to get into stable investing. Industrial stocks are those that provide infrastructure and equipment to industries, even governments, that need these products to function. These are “nuts and bolts” parts of the economy.
So, why Magna stock? At first, it might seem more like a consumer discretionary stock, providing auto manufacturing components to vehicles. However, practically everyone does need a vehicle. And as the world shifts towards electric vehicles (EV), it’s proving to be a solid investment – one that still looks undervalued.
EVs are still the future, but Magna stock is rooted in the present as well. Whether it’s providing components for EVs or supporting the current market, Magna is ready to roll. And it looks like it’s already doing just that after years of volatility.
Into earnings
The last few years were hard on Magna stock. The company went through a rough patch during the pandemic when supply chains were constantly under stress. Yet now, Magna stock looks like an undervalued play investors will want to jump in on.
During its most recent quarter, Magna reported quarterly earnings growth of 21.1% year-over-year,. which was a clear indicator that the company achieved positive financial momentum. In fact, the quarter was stronger than most thought, sending shares higher.
Even with revenue declining 3%, annual growth prospects remain strong, especially with its strategic position on the automotive technology side. As of writing, the stock looks undervalued, trading at a price-to-earnings (P/E) ratio of 10.8 and future P/E of 7.9. This demonstrates the stock might be attractive for those seeking further growth.
Bottom line
Then, there’s the dividend. Magna stock currently provides a 4.2% dividend yield, which is fairly high for income-focused investors. What’s more, it has a payout ratio of 45%. Therefore, Magna stock looks as though it can support more future dividend payments – and even growth! In fact, a $7,000 investment could bring in $293 in annual income! That’s money you can look forward to flowing in no matter the market, no matter what’s happening with this company or on a macro level.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| MG | $63.41 | 110 | $2.67 | $293.70 | Quarterly | $6,975.10 |
After a few years in a rough patch, Magna stock looks like it’s on the way out. With strong and supportive dividends, an undervalued share price, and more growth on the way, it’s the perfect time to jump in. At the very least, investors will want to keep this undervalued industrial stock on their watchlist.
