Magna International is a global automotive supplier and one of the largest auto parts manufacturers in the world. It is a mobility technology company inventing new products and processes for the future. The company engages in the supply of systems and components to every major original equipment manufacturer.
Magna International has operations across five continents and 28 countries. The company operates through a large network of 348 manufacturing and 91 product development, engineering and sales centers worldwide. North America is its largest market accounting for nearly half of the company’s sales; Europe and Asia are the other major markets.
Magna International’s key operating segments are
- Body Exteriors & Structures (45% earnings),
- Power & Vision (38%),
- Seating Systems (14%),
- Complete Vehicles (2%) and
- corporate & others (1%).
The company has total vehicle engineering and manufacturing expertise, as well as product capabilities. It also possesses electronic and software capabilities.Investment Data
- Opportunity Score: 69
- Ticker: TSE:MG
- Sector: Consumer Cyclical
- Industry: Autos
- Market Cap: 16.27B
- P/E: 6.63
- Dividend Yield: 2.82
- Dividend Payout Ratio: 24.59
- FFO Payout Ratio: Dividend Snapshot Members Only
- FCF Payout Ratio: Dividend Snapshot Members Only
- Chowder Score: Dividend Snapshot Members Only
- Piotroski-F Score: Dividend Snapshot Members Only
- 3, 5, 10-year Revenue Growth: Dividend Snapshot Members Only
- 3, 5, 10-year Dividend Growth: Dividend Snapshot Members Only
Revenue Growth & Market Exposure
Magna International manufactures all the necessary parts to build complete vehicles ranging from seating systems to body exteriors, structures, and powertrains. Magna’s world class manufacturing and product and process innovations have enabled the launch of new vehicles worth billions of dollars each year. The company partners with leading car brands including Mercedes-Benz, BMW, Jaguar, and Toyota, etc. and helps to introduce unique features powered by Magna technology.
With over six decades of experience in the auto industry, Magna International has become the preferred choice of customers. Magna’s deep product expertise, as well as complete vehicle engineering and assembly operations, have also attracted startup companies like Lyft for collaboration. Magna’s popularity can be gauged by the fact that its products can be found on most vehicles today.
The company is leading the way in all areas of future mobility, with a strong focus on electrification and autonomy. Futuristic trends such as lightweighting, electrification, autonomy, and smart mobility provide ample opportunities for growth. Magna is also expanding its footprint in China which is the world’s largest new vehicle market.
Given its large geographic footprint, the company is favorably placed to address every major automaker in the world. The global automotive supply business is estimated to be a $1-trillion opportunity and Magna is in a good position to leverage its experience and adapt to the changing trends in the industry. As one of the largest and most respected automotive parts suppliers in the world, Magna is known for its world-class manufacturing and innovative processes.
Magna International is expecting future growth driven by the demand of lightweighting solutions, dual-clutch transmissions, Advanced Driver Assistance Systems (ADAS), electrified products, seats, mechatronic products and complete vehicle assembly.
Magna International is a dividend aristocrat having compounded its dividend growth at an impressive 15% annually, over the last decade.
The company last raised its dividend by almost 11%, representing its tenth consecutive annual dividend increase for this Canadian Dividend Aristocrat. It returned $2.28 billion to shareholders through $1.83 billion in share repurchases and $448 million in dividends in 2018. The company currently sports a dividend yield of 3% and a very low payout ratio of 29%.
Magna International is expecting its bottom line to grow at the same rate as global vehicle growth. The company expects free cash flow to exceed $6.5 billion during 2019-2021, which will be returned to shareholders and used for future investments. Strong earnings and cash flow growth should enable the company to keep paying and raising dividends in the future.
The company is investing in new technologies and innovative features such as ADAS features, autonomous features including valet park driver monitoring systems and 3D surround view, scalable powertrain variants, etc. World class manufacturing facilities, innovative product portfolio, and an experienced management team are the company’s strong competitive advantages.
The automotive supply industry is highly competitive. The company competes not only with traditional automotive suppliers but also a number of established electronics and semiconductor companies who are expanding their presence in the automotive industry.
Magna competes with the likes of Linamar Corp, Martinrea International, Uni-Select Inc TSE:UNS, Exco Technologies TSE:XTC, Westport Fuel Systems, etc. As the only auto supplier to build complete vehicles, Magna enjoys a strong competitive edge over its peers.
Magna is at the forefront of the technological revolution in the automotive industry. A complete vehicle systems knowledge and a proven track record of technological advancements position Magna well for the future where electrification, autonomy, and smart mobility are intertwined. Strategic partnerships and innovative ideas should drive shareholder value in the future. Investment in futuristic ideas positions Magna well for strong sales, solid earnings and increased free cash flows going forward.
An investment in Magna is an investment in the auto industry. What do you expect the growth to be or the ongoing sales from the manufacturer?
DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.