Magna International

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

Sales

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%

Dividend Beginner

A 22 year old Canadian dividend growth investor striving for early financial independence; building as many passive income streams as early as possible.
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    • 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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