Magna to Pay $0.495 Quarterly Dividend, Yielding 3.2%

Magna International (NYSE: MGA, TSX: MG) will pay shareholders $0.495 per share on Friday, November 27 — a quarterly dividend declared Thursday, October 29 that works out to $1.98 annualized and a 3.2% dividend yield (annual dividend divided by share price).

Investors need to own the stock before the ex-dividend date of Friday, November 13 to receive the payment; that's also the record date.

Is the dividend safe?

By the numbers, yes. Magna's dividend payout ratio (share of earnings paid out as dividends) sits at 34.4%, meaning earnings comfortably cover the payout. Research analysts expect the company to earn $7.84 per share next year, which would push the forward payout ratio down to 25.3% — even more headroom.

The track record is mixed but stable:

• Magna has raised its dividend for 6 consecutive years.
• Over the last three years, however, the payout has decreased by an average of 0.1% per year.

The takeaway: the $1.98 annual dividend looks well covered today and, on analyst forecasts, even better covered tomorrow.

How did the latest quarter go?

Magna reported earnings on Friday, October 30, and the top and bottom lines pointed in opposite directions. The company posted $1.83 in earnings per share, beating the consensus estimate of $1.58 by $0.25 — and well ahead of the $1.33 EPS it reported in the same quarter a year ago.

Revenue told a softer story. The quarter brought in $9.86 billion, short of analysts' $10.01 billion expectation and down 3.9% year over year. Profitability metrics held up: return on equity came in at 16.26% and net margin at 1.99%. For the current fiscal year, analysts as a group expect Magna to post $7.07 in EPS.

In short: profit per share is accelerating while sales drift lower — a mix that keeps the dividend funded.

What do the trading numbers show?

Shares opened at $61.35 on Wednesday, against a market capitalization of $15.85 billion. Valuation and balance-sheet markers:

• P/E ratio of 19.66; price-to-earnings-growth ratio of 0.67; beta of 1.46 (a measure of volatility relative to the market).
• Quick ratio of 0.80 and current ratio of 1.14 (short-term liquidity tests); debt-to-equity of 0.33.
• 50-day moving average of $64.49; 200-day moving average of $62.94.
• Twelve-month range: $45.33 low, $73.22 high.

The stock is trading below both its 50-day and 200-day averages and sits closer to the bottom of its yearly range than the top.

Who is Magna?

Magna International is a Canadian mobility technology supplier that designs and manufactures components, systems and complete vehicles for automakers. Its operations span body and exterior systems, seating, powertrain and electronics, plus vehicle engineering and contract manufacturing, with a portfolio that includes mirrors, lighting systems and roof systems. The company supports a range of vehicle types, including those with electric and advanced driver-assistance technologies.

A 3.2% yield with a 34.4% payout ratio, backed by a quarter that beat on profit — that's a dividend investors can reasonably bank on for now.