Thursday, December 31, 2015

Magna International Inc.

Sound bite for Twitter and StockTwits is: Price is reasonable. I would prefer to see a few more years without Frank to see how this company works out. Dividends have been erratic so would not be my first choice as a dividend paying stock to buy. See my spreadsheet on Magna International Inc.

I do not own this stock of Magna International Inc. (TSX-MG, NYSE-MGA), but I used to. 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. I am certainly curious on how this company will do without Frank Stronach.

First dividends are paid in US$, so they will fluctuate depending on the US$ CDN$ currency exchange rate. Also dividends have been rather erratic going both up and down and varying how many are paid in a year. The dividend growth in US$ has been at 76% and 7.46% per year over the past 5 and 10 years. The thing is there was a huge increase in dividends in 2010 that is unlikely to be repeated.

The median increase over the past 4 year is at 16.1% per year. The last increase was in 2015 and it was for 15.8%. The current dividend yield is 2.1%. It is the same in US$ and CDN$. So currently, the dividends are moderate as is the dividend growth. They can certainly afford the dividends as the 5 year median Dividend Payout Ratios for EPS 18.2% and for CFPS is 10.3%.

The Balance Sheet is unremarkable. The Liquidity Ratio is a bit low and the Debt Ratio is a bit high. I like to see both these ratios at 1.50 or better. For these ratios, higher is better. The Liquidity Ratio is 1.31 and the Debt Ratio is 1.92 and has been on a downward trend since 2009. Leverage and Debt/Equity Ratios are a bit high. For these ratios, lower is better. They are 2.09 and 1.09. It is better if they were under 2.00 and under 1.00, respectively.

On my last Dividend Stock report for December, Magna was listed as expensive. This is because I used the CDN$ stock price, but the US$ dividend. In actual fact using the historical median dividend yield, this stock is still at a good price. The historical dividend yield is 1.71% and this stock currently has a dividend yield of 2.10%, a value some 22% higher.

The 5 year low, median and high median Price/Earnings per Share Ratios are 7.04, 9.79 and 12.54. The corresponding 10 year median ratios are a bit higher at 8.06, 10.73 and 13.37. The current P/E Ratio is 9.37 based on a stock price of $57.98 and 2015 EPS of 4.47 US$ and $6.19 CDN$. This stock price testing suggests that the stock price is reasonable. (Note that you get the same results using P/E Ratios and stock price testing in US$ and CDN$.)

When I look at analysts' recommendations, I see Strong Buy, Buy and Hold. Most of the recommendations are a Buy and the consensus recommendation is a Buy. The 12 months stock price is $62.97 US$ or $87.18 CDN$. This implies a total return of 52.47% with 50.37% from capital gains and 2.10% from dividends. This seems rather high to me.

There is an interesting article in Money Flow Index looking at recent takes in this stock. An article posted in Putnam Standard talks about some recent analysts changes. Neha Chamaria of Motley Fool wades in on what he thinks of this stock.

I will have only one entry for this stock as I must do on some stock because I cover too many stocks to do double entries on all that I follow.

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 International Inc.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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Have a great New Year’s everyone.

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