Monday, December 17, 2012

Magna International Inc

On my other blog I am today writing about REITs, Income Trusts and DRIPs... continue...

I do not own this stock of Magna International Inc. (TSX-MG.A, NYSE-MGA), but I used to. It is also a stock I have tracked for some time. I have always liked Frank Stronach, the entrepreneur who use to run this company. I held this company between September 2002 and September 2006 and earned 5% return per year including dividends. This is in the automobile industry and this has not been a great industry to invest in for some time.

Frank Stronach has been bought out so it will be interesting to see how the company does without him. It certainly does not matter if you are a Canadian or an American investor; no one has made much in investing in this company over the past 5 or 10 years. However, Canadian investors have done worse than US investors.

For Canadian investors, the total returns have been negative over the past 5 and 10 years, with losses at 4.65% per year and 2.12% per year over these periods. Dividend income over the past 5 and 10 years was at 1.42% and 1.77% per year. That leaves capital losses at 6.07% and 3.89% per year over the past 5 and 10 years.

This stock does pay dividends. However, it is an industrial stock and they pay dividends as they can afford to. This means that the dividends have fluctuated. There has been some progress over the past 5 years and dividends are up 2.89% per year. However, over the past 10 years, dividends are down by 0.58% per year.

Dividend yield is currently not bad at 2.33%. However, dividends have often been less than 1% and the 5 year median dividend yield is just 1.25%.

There has been a big change with regards to the classes of stock under this company. There used to be 2 classes of shares, Class B Multiple voting shares and Class A subordinate voting shares. As of August 31, 2010 there are only common shares. Over the past 5 and 10 years the outstanding shares have increased by 1.2% and 3.42% per year. There was a large increased in 2010 (of 7.7%) mainly because of shares issued under the plan of arrangement for Frank Stronach. Otherwise, shares have been issued because of stock options and the company has bought back shares.

As for all companies that report in US$, this stock has done better in US$ terms than in CDN$ terms. Revenue is up by 0.83% and 5.78% per year over the past 5 and 10 years. Revenue per Share is down by 0.37% per year over the past 5 years and up by 2.29% per year over the past 10 years. This is in CDN$ terms.

Earnings per share is up over the past 5 years by 9% per year. EPS is down by 1.4% per year over the past 10 years. Cash Flow per share is not as good, with CFPS up by 1.1% per year over the past 5 years and down by2% over the past 10 years. These are in CDN$ terms.

The Book Value per share performance is not great either with BV down by 1.2% per year and down by 1.9% per year over the past 5 and 10 years. This is in CDN$ terms.

The Return on Equity has improved greatly over the past 2 years. The ROE for 2011 financial year was very good 24.8%. The 5 year median ROE is much lower at just 7.7%. The ROE on comprehensive income tells a different story with improvement also in the last 2 years, but with a 2011 ROE of just 8.9%. The 5 year ROE is 8.9% also. A big difference between the ROE on net income and comprehensive income points to the fact that the net income may not be of good quality.

The Liquidity Ratio has often been a bit low as it was at the end of 2011, being just at 1.42. The current Liquidity Ratio is also a bit low at 1.43. I would prefer to see this ratio at 1.50 or higher. The Debt Ratio has always been very good as it was at the end of 2011 at 2.27. The current one is also very good at 2.23. Both the current Leverage and Debt/Equity Ratios are good at 1.82 and 0.82.

This stock has continued to recover from 2008/2009. Analysts think it was do fine for the financial year ending in 2012. The EPS and CFPS have improved over the past 9 months. The company has increased the dividends by 10% in 2012. This dividend increase points to confidence by management in the ability of the company to improve.

Magna International is the most diversified global automotive supplier. They design, develop and manufacture technologically advanced automotive systems, assemblies, modules and components, and engineer and assemble complete vehicles, primarily for sale to original equipment manufacturers ("OEMs") of cars and light trucks. Their capabilities include the design, engineering, testing and manufacture of automotive interior systems; seating systems; closure systems; body and chassis systems; vision systems; electronic systems; exterior systems; powertrain systems; roof systems; hybrid and electric vehicles/systems; as well as complete vehicle engineering and assembly. Its web site is here Magna. See my spreadsheet at mg.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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