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Traders are at all times looking out for undervalued shares on the TSX, particularly throughout occasions of market uncertainty. These are firms which have fallen out of favour within the quick time period however nonetheless provide robust fundamentals, long-term development, and reliable revenue. One such inventory is Magna Worldwide (TSX:MG). It’s down roughly 12% over the previous yr, but it stays one of the crucial steady and promising manufacturing names on the Canadian market. For these trying to purchase and maintain, this could possibly be a wise time to take a more in-depth look.
About Magna
Magna is a worldwide chief in automotive elements. It provides elements to almost each main automaker, together with programs for powertrains, seating, electronics, and physique exteriors. As electrical autos (EVs) acquire extra floor, Magna has made the shift to assist EV improvement as effectively, protecting it aligned with trade tendencies. Its scale, international attain, and skill to adapt have helped it preserve a strong place even by the ups and downs of the auto market.
Within the first quarter of 2025, Magna reported a internet revenue of US$146 million, which marked a powerful rebound from earlier quarters impacted by labour disruptions and value pressures. Income got here in at US$10.97 billion, up from US$10.67 billion the yr earlier than. The dividend inventory additionally raised its gross sales steerage for the yr, reflecting optimism about order flows and manufacturing quantity within the second half of 2025.
A useful selection
What actually makes Magna stand out proper now’s its valuation. It trades at a ahead price-to-earnings (P/E) ratio of about 7.8 and a trailing P/E of 9.1. For context, many TSX-listed industrial shares commerce effectively above these ranges. Traders usually have a look at single-digit P/E ratios as an indication of undervaluation, particularly when the underlying enterprise stays worthwhile and forward-looking. Magna additionally trades at simply 0.85 occasions e-book worth and underneath seven occasions free money move, making it one of many extra inexpensive large-cap manufacturing names in Canada.
On the time of writing, the dividend inventory trades round $52.66, down from the mid-$60s earlier within the yr. That’s a decline of practically 12%, a lot of it linked to broader considerations about rates of interest, provide chain points, and tariff fears. Nevertheless, the dividend inventory hasn’t fallen due to company-specific issues. It’s nonetheless rising earnings, producing robust money move, and sustaining wholesome relationships with automakers globally.
Add in revenue
Then there’s the dividend. Magna presently pays $2.68 per share yearly for a yield of slightly below 5%. The dividend inventory elevated its dividend for 12 straight years, exhibiting a dedication to shareholders. The present payout ratio is round 47%, leaving room for continued will increase if earnings enhance. In a risky market, a dependable dividend goes a great distance in offering traders with revenue and stability whereas they anticipate a rebound. In the meantime, a $5,000 funding might usher in $251.92 per yr!
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| MG | $52.66 | 94 | $2.68 | $251.92 | Quarterly | $4,951.96 |
Magna can also be financially sound. It produced practically $5 billion in working money move during the last yr and has about $2.15 billion in free money move. Whereas it carries about $10.86 billion in debt, it maintains robust protection ratios and continues to put money into future development, together with applied sciences supporting electrical and autonomous autos.
Backside line
As a result of it operates globally, Magna will not be overly reliant on one market. In truth, 46% of gross sales come from North America and 43% from Europe. This unfold helps clean out the results of regional slowdowns or financial hiccups. With manufacturing anticipated to ramp up within the second half of the yr and inflation pressures easing, the timing could also be proper for a longer-term restoration within the auto sector.
In the long run, Magna is a dividend inventory that checks plenty of bins. It’s undervalued, down about 12% over the previous yr, and nonetheless paying out a powerful dividend. It has international attain, dependable earnings, and the form of monetary self-discipline that offers traders confidence. For anybody trying to purchase and maintain a TSX inventory with each revenue and development potential, Magna Worldwide may simply be the fitting match.
