Is it a good company at a reasonable price? Because of the volatility of dividends, this company would not be the sort I would invest in currently. The company is selling at a reasonable price and it may even by cheap accounting to the dividend testing.
I do not own this stock of Magna International Inc (TSX-MG, NYSE-MGA), but I used to. I held this company between September 2002 and September 2006 and earned 5% return per year including dividends. When I bought this stock in 2002, I felt I was paying a good price for it. There were some rumors that it might be bought out in 2006, so I sold. Magna is a stock I have tracked for some time. I have always liked Frank Stronach, the entrepreneur who used to run this company. Manufacturing firms are fairly risky and it is not the sort of company I usually buy.
When I was updating my spreadsheet, I noticed EPS and AEPS was lower in 2022 but are expected to recover in 2023. Expenses were high in 2022 due to impairments to operations and Russia and losses on some investments. AEPS was $5.13 in 2021, $4.10 in 2022, and are expected to be $5.52 this year. EPS was $5.00 in 2021, $2.03 in 2022, and are expected to be $5.01 this year.
I have data for dividends for the last 34 years and dividends increased in 24 of these years and was decreased in 7 of those years. Even though this company is on the three dividend lists that I follow (probably because the last decrease was in 2009), I have to wonder if this is a good dividend growth stock because of the volatility in dividends in the past. I have invested in stock that have had one decrease over a number of years, because economic problems or necessary reorganizations can happen. But that is my limit.
The current dividend yield is moderate with dividend growth moderate. The current dividend yield is moderate (2% to 4% ranges) at 3.32%. The 5 and 10 year median dividend yields are also moderate at 2.75%, 2.28%. The historical median dividend yield is low (below 2%) at 1.97%. The dividend increases are moderate (8% to 14% ranges) at 10% per year over the past 5 years. The last dividend increase was in 2023 and it was for 2.2%. The dividends have been quite volatile for this stock. I have data for the past 34 years and dividends were increased in 24 years and decreased in 7 years.
The Dividend Payout Ratios (DPR) are fine. The Dividend Payout Ratios (DPR) are good. The DPR for 2022 for Earnings per Share (EPS) is 89% with 5 year coverage at 36%. The DPR for 2022 for Adjusted Earnings per Share (AEPS) is 44% with 5 year coverage at 32%. The DPR for 2022 for Cash Flow per Share (CFPS) is 21% with 5 year coverage at 15%. The DPR for 2022 for Free Cash Flow (FCF) is 124% with 5 year coverage at 27%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 88.67% | 36.32% |
| AEPS | 43.90% | 32.35% |
| CFPS | 21.29% | 15.25% |
| FCF | 124.15% | 27.49% |
Debt Ratios are fine, but liquidity could be improved. The Long Term Debt/Market Cap Ratio for 2022 is good at 0.18 and currently at 0.26. The Liquidity Ratio for 2022 is a bit low at 1.14 and 1.11 currently. If you added in Cash Flow after dividends, the ratios are still low at 1.28 and 1.29. I prefer this ratio to be at 1.50 or above. The Debt Ratio for 2022 is fine at 1.69 and 1.59 currently. The Leverage and Debt/Equity Ratios for 2022 are fine at 2.54 and 1.50 and currently at 2.70 and 1.70.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.18 | 0.26 |
| Intang/GW | 0.15 | 0.22 |
| Liquidity | 1.14 | 1.11 |
| Liq. + CF | 1.28 | 1.29 |
| Debt Ratio | 1.69 | 1.59 |
| Leverage | 2.54 | 2.70 |
| D/E Ratio | 1.50 | 1.70 |
The Total Return per year is shown below for years of 5 to 34 to the end of 2022 in CDN$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2017 | 5 | 13.11% | 4.13% | 1.32% | 2.82% |
| 2012 | 10 | 16.03% | 15.37% | 11.84% | 3.53% |
| 2007 | 15 | 15.41% | 11.77% | 9.53% | 2.25% |
| 2002 | 20 | 7.86% | 8.46% | 6.64% | 1.82% |
| 1997 | 25 | 10.86% | 6.76% | 5.14% | 1.61% |
| 1992 | 30 | 13.83% | 11.27% | 8.80% | 2.47% |
| 1988 | 34 | 9.26% | 13.02% | 10.11% | 2.91% |
The Total Return per year is shown below for years of 5 to 34 to the end of 2022 in US$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2017 | 5 | 10.35% | 2.61% | -0.17% | 2.79% |
| 2012 | 10 | 12.59% | 11.65% | 8.43% | 3.22% |
| 2007 | 15 | 13.01% | 9.49% | 7.09% | 2.40% |
| 2002 | 20 | 8.69% | 9.61% | 7.24% | 2.37% |
| 1997 | 25 | 11.10% | 7.53% | 5.57% | 1.96% |
| 1992 | 30 | 13.59% | 11.04% | 8.46% | 2.58% |
| 1988 | 34 | 8.90% | 12.59% | 9.65% | 2.94% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 11.01, 16.90, and 19.76. The corresponding 10 year ratios are 8.05, 9.66 and 11.71. The corresponding historical ratios are 8.48, 11.83 and 13.11. The current P/E Ratio is 11.13 based on a stock price of $75.72 and EPS estimate for 2023 of $6.80 ($5.01 US$). The current ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median. This testing is in CDN$.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 7.10, 12.37 and 18.61. The corresponding 10 year ratios are 7.34, 10.35 and 12.60. The current P/AEPS Ratio is 10.12 based on a stock price of $55.85 and AEPS estimate for 2023 of $5.52. The current ratio is between low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median. This testing is in US$.
I get a Graham Price of $92.41. The 10-year low, median, and high median Price/Graham Price Ratios are 0.66, 0.88 and 1.06. The current P/GP Ratio is 0.82 based on a stock price of $75.72. The current P/GP Ratio is between the low and median ratios of the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. This testing is in CDN$.
I get a 10-year median Price/Book Value per Share Ratio of 1.63. The current P/B Ratio is 1.36 based on a stock price of $55.85, Book Value of $11,748M, and Book Value per Share of $41.09. The current ratio is 17% below the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median. This testing is in US$.
I also have a Book Value per Share (BVPS) estimate for 2023 of $42.90. This implies a P/B Ratio of 1.30 for a Stock Price of $55.85 and with a Book Value of $12,266M. This ratio is 20% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$.
I get a 10-year median Price/Cash Flow per Share Ratio of 5.58. The current P/CF Ratio is 5.53 based on Cash Flow per Share estimate for 2023 of $10.10, Cash Flow of $2,888M and a stock price of $55.85. The current ratio is .9% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. This testing is in US$.
I get an historical median dividend yield of 1.99%. The current Dividend Yield is 3.29% based on dividends of $1.84 and a stock price of $55.85. The current yield is 66% above the historical dividend yield. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$.
I get a 10 year median dividend yield of 2.33%. The current Dividend Yield is 3.29% based on dividends of $1.84 and a stock price of $55.85. The current yield is 42% above the 10 year dividend yield. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$.
The 10-year median Price/Sales (Revenue) Ratio is 0.46. The current P/S Ratio is 0.37 based on Revenue estimate for 2023 of $42,649M, Revenue per Share of $149.16 and a stock price of $55.85. The current ratio is 19% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. This testing is in US$.
Results of stock price testing is that the stock price is reasonable and maybe cheap. The dividend yield tests are saying the stock price is relatively cheap. The P/S Ratio test is saying the stock price is reasonable, but it is almost in the cheap area. Most of the other tests are saying the stock price is reasonable.
When I look at analysts’ recommendations, I find Strong Buy (5), Buy (6), and Hold (10). The consensus would be a Buy. The 12 month stock price consensus is $97.35 ($71.69 US$) with a high of $105.09 ($77.39 US$) and low of $91.37 ($67.29 US$). With the consensus price of $97.35, the implied total return would be 31.86% with 28.56% from capital gains and 3.30% from dividends.
Some analysts do not like this stock on Stock Chase. One was bearish on the auto sector because of EV cars. Stock Chase gives this stock 4 stars out of 5. This company is on the dividend lists that I follow. Aditya Raghunath on Motley Fool thinks this is a stock to buy and hold for the next decade. Amy Legate-Wolfe on Motley Fool thinks you should consider buying Magna. The company issued a press release on Global Newswire about its 2022 year end results. The company put out a press release on Global Newswire about their third quarter of 2023.
Simply Wall Street put out a report on this stock via Yahoo Finance. They suggest caution when dealing with this company. Simply Wall Street gives this stock 3 and one half stars out of 5. They list two warnings of dividend of 3.28% is not well covered by cash flows; and large one-off items impacting financial results.
Magna International supplier's product groups include exteriors, interiors, seating, roof systems, body and chassis, powertrain, vision and electronic systems, closure systems, electric vehicle systems, tooling and engineering, and contract vehicle assembly. In 2022, roughly 50% of Magna's revenue came from North America while Europe accounted for approximately 38%. Its web site is here Magna International Inc.
The last stock I wrote about was about was Methanex Corp (TSX-MX, NASDAQ-MEOH) ... learn more. The next stock I will write about will be Richards Packaging Income Fund (TSX-RPI.UN, OTC-RPKIF) ... learn more on Friday, December 8, 2023 around 5 pm. Tomorrow on my other blog I will write about Something to Buy December 2023 .... learn more on Thursday, December 7 around 5 pm.
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