Realizing a Post-Brexit Gain on Magna International (MG)

Magna International

As I stated when I sold my position in SNC-Lavalin, I am trying to trim the excess fat from my portfolio. Prime candidates include stocks with low yields. Magna International’s approximate 2.4% dividend simply cannot stand up against some of my other stocks like Exchange Income Corp., who sport a safe and increasing monthly dividend of 5%+, and is growing much faster.

My intention when I initially bought Magna International was to flip it and turn a quick profit – because I knew that the drop in stocks due to Brexit were overblown. I was right, at least in the case of Magna. While I held it, both this and SNC contributed to my Industrials exposure which has not been stripped down only to Exchange Income Corp., who is continuing to push new highs.

I purchased the shares at $48.63, with a trading cost of $6.95 for a total cost basis of $1,465.85. The yield was a little higher then, by around 25 basis points.

Magna International Returns 13.65%

On October 17th, I sold all 30 of my shares of Magna International at $55.44 (an increase of 14% over my purchase price), with another trading cost of $6.95.

I recouped $1,656.25 on this trade when my initial investment was $1,465.85. This is a profit of $190.40, or 12.99% due to transaction costs. In addition to the capital gains achieved from holding MG, the stock has returned $9.68 in dividends over my holding period of three and a half months.

Therefore, my initial investment of $1,465.85 has ultimately become $1,665.93; a total return of 13.65%.

Dividend Income Falls 1.28%

By selling MG, I have reduced my annual dividend income by $30.00 USD ($40.02 CAD as of Oct 22) (For the sake of simplicity I count both CAD and USD as equivalent in my annual / monthly dividend income). MG accounted for a measly 1.28% of my dividend income. My new 12-month forward dividend income has been reduced from $2,276.44 to $2,246.44. Monthly income has been reduced from $189.70 to $187.20.

Before Net Increase After
Annual Dividend Income $2,276.44 -$30.00 $2,246.44
Monthly Dividend Income $189.70 -$2.50 $187.20
Percentage Increase -1.33%

2 Replies to “Realizing a Post-Brexit Gain on Magna International (MG)”

    1. Hi Russ,

      Exchange Income Corp. determines the feasibility of their dividend through “Free Cash Flow Less Maintenance Capex”. In this case, YTD they have a payout ratio of 64% as of Q2. In addition, revenue, earnings, and free cash flow have been increasing swiftly. I believe the company is well positioned at the moment. Personally I’m a little worried about the effect the Liberal Carbon Tax will have on operations.

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