MG:CC - Better Buy for Passive Income: Magna International Stock or Linamar Stock?

2023-12-20 16:10:00 ET

Canadian investors continue to have passive income on their minds. Yet many seem to focus on dividend income for that goal. However, returns are just as important if you want to create long-term passive income. This is why electric vehicle (EV) stocks still have a place in a passive-income stock discussion.

Today, let’s look at two EV stocks that could provide huge passive income in the next year or so. But which is better, Magna International ( TSX:MG ) or Linamar ( TSX:LNR )?

Magna

Like a pheonix from the ashes, Magna stock has taken a huge turnaround in the last few months. The company went through some serious issues during the pandemic. After making many partnerships to produce electronic components, along with their already strong array of car parts, the pandemic hit them hard.

Supply-chain disruptions lasted years, yet today, that’s changing. The company has seen sales rise higher and higher and expects more from higher production of its products. Shares of Magna stock are now up 15% in the last two months. But it still offers major value for future passive income .

Shares of Magna stock currently trade at just 15.57 times earnings. You can get a dividend yield of 3.29% while it still holds strong value. With its debt-to-equity (D/E) ratio at just 66% as of writing, as well as a payout ratio of a strong 50%, this company looks well positioned for more growth. Now, let’s say you put $5,000 into Magna stock. Here is what that could turn into reaching 52-week highs.

So, with Magna stock, you could achieve a passive income of $1,072 in returns and $164.34 in dividends. That’s total passive income of $1,236.34!

But what about Linamar stock?

Linamar

Just like Magna stock, Linamar stock also focuses on the production of machinery and parts for machinery. This, of course, includes EVs. However, it also includes other areas of the market, such as industrial, agricultural, and aerial products. So, you certainly get a bit more diversification.

In fact, this has proven a solid move, as the company continues to beat out earnings estimates quarter after quarter. This has led to double-digit top- and bottom-line growth for the company. Yet again, shares of Linamar stock offer value, even with shares spiking 9% in the last few weeks!

Yet if you’re looking for value, Linamar stock trades at just 7.71 times earnings as of writing. You can grab onto a 1.43% dividend yield as of writing. Furthermore, shares are down 16% in the last six months, offering another way to lock in some value. Meanwhile, the company also has a strong D/E ratio at just 30%, though far less focus on its dividend with a payout ratio of 10%. Now, let’s say you put $5,000 into Linamar stock. Here is what that could turn into reaching 52-week highs.

As you can see, you can achieve returns of $1,478 and $72.16 in dividend income. That’s a total of $1,550.16! So, which is the better buy?

Bottom line

While you could achieve more returns from Linamar stock, I would focus on the fact that Magna stock seems to offer higher dividends. You can still achieve strong returns for your passive income but even more in future income from a higher dividend. What’s more, the company remains focused on that dividend growth for the future.

The post Better Buy for Passive Income: Magna International Stock or Linamar Stock? appeared first on The Motley Fool Canada .

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Linamar and Magna International. The Motley Fool has a disclosure policy .

2023