Today I picked up 32 shares of auto parts giant Magna International (MG.TO) at $54 per share. This purchase will increase my yearly dividend income by $32.
About the Company
Magna is a leading global automotive supplier with 305 manufacturing operations and 93 product development, engineering and sales centres in 29 countries. Its product capabilities include chassis, interior, exterior, seating, powertrain, electronic, vision, closure and roof systems and modules and complete vehicle engineering and contract manufacturing.
Automotive Exposure
I believe Magna is the best company for the automotive exposure. This is a new position for me and I plan to hold those shares for a very long time. I bet my bottom dollar that this company will double in 10 years. Prior to this purchase I had zero exposure in auto parts industry. Now I have a whopping 6% exposure through Magna.
Magna is cheap
The shares are currently trading at 8.8 P/E ratio compared to its 5 years average of 10.34. Magna is cheap and it has a pristine balance sheet with $2 billion in cash compared to $1.6 billion in total debt.
Dividend grown potential
The company has a massive dividend growth potential. Magna has been a terrific dividend grower since the financial crisis of 2008-09. It started paying 4.5 cents quarterly dividend in 2010 and has increased its payouts annually each year since. They just announced a 14% dividend increase from 22 to 25 cents per share. This works out to a current dividend yield of 2.5%. Magna’s payout ratio is just under 20% meaning it has lots of room for dividend growth.
I was planning to buy at MG at dip, but I missed the opportunity. Now it is far above from my target price.
ReplyDeleteHappy investing :D .
Hi FJ,
DeleteI missed the dip as well. The sub $50 level was a great opportunity to get in. If it tests the previous level I will get a second tranche of shares. However, they raised the divvy so the share price is getting a boost. Take care!