Magna International (MGA)

The logo for Magna International auto supplier on one of the Canadian company's buildings
JHVEPhoto/Shutterstock

Headquartered in Aurora, Ontario, Canada, Magna International is one of the world’s leading automotive suppliers.

Sure, the name may not sound as familiar as Ford, General Motors or Toyota, but Magna supplies all three. Its customers include EV players like Rivian, Lucid and Nio.

And if you want to collect dividends from the automotive sector, Magna is a name that simply can’t be ignored.

Consider this: In 2016, Magna paid $1 per share in dividends to shareholders. This year, it is paying $1.72 per share. That’s a 72% increase.

Of course, the automotive sector has experienced production disruptions due to the continued semiconductor chip shortage. And Magna’s numbers were impacted too.

In Q3, the company generated $7.9 billion in sales, 13% lower compared to a year ago.

Management expects full-year 2021 sales to be in the range of $35.4 billion to $36.4 billion. In 2020, sales totaled $32.6 billion.

Magna shares have fallen 16% over the past six months and now offer an annual dividend yield of 2.2%. The average yield of the S&P 500 is a measly 1.3% at the moment.

If you don’t want to pick individual winners and losers, remember you can always build a diversified passive income portfolio just by using your spare change.

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Genuine Parts Co. (GPC)

The exterior of a NAPA Auto Parts store in Portland, Oregon with a pickup truck parked out front
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Genuine Parts Co. does not make any cars. It doesn’t even make parts. Instead, the company focuses solely on the distribution of automotive and industrial replacement parts.

GPC was founded in 1928 and now has a network of over 10,000 locations in 14 countries. The company owns the NAPA Auto Parts brand.

The automotive sector is known for being cyclical, but GPC managed to deliver sales growth in 87 of its 93 years in business. In Q3, sales increased 10.3% year over year to $4.8 billion.

The most impressive part, though, is the dividend. In February 2021, GPC announced a 3% increase to its quarterly dividend rate to 81.5 cents per share, marking its 65th consecutive annual dividend hike.

At the recent share price, the company provides an annual dividend yield of 2.4%.

To be sure, after a 36% rally year to date, GPC shares trade at about $134 apiece. But remember, you don’t have to start big — a popular investing app allows you to buy fractions of shares with as much money as you are willing to spend.

Earn big returns outside the stock market?

An art gallery manager hanging paintings while organizing an exhibition
SeventyFour/Shutterstock

Ultimately, don’t forget that stocks tend to correlate with each other. While these two companies are not as volatile as the EV plays, they are not immune to market downturns.

In other words, diversification is key — and you don’t have to stay in the stock market to get it.

If you want to invest in something with high return potential that’s insulated from the stock market’s violent swings, consider this overlooked asset: fine art.

According to Deloitte’s latest Art & Finance Report, 85% of wealth managers today say that wealth management services should include art.

Contemporary artwork has outperformed the S&P 500 by a commanding 174% over the past 25 years, according to the Citi Global Art Market chart. And on a scale of -1 to +1 (with 0 representing no link at all), their correlation was just 0.12 over the past 25 years.

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Fine art as an investment

Stocks can be volatile, cryptos make big swings to either side, and even gold is not immune to the market’s ups and downs.

That’s why if you are looking for the ultimate hedge, it could be worthwhile to check out a real, but overlooked asset: fine art.

Contemporary artwork has outperformed the S&P 500 by a commanding 174% over the past 25 years, according to the Citi Global Art Market chart.

And it’s becoming a popular way to diversify because it’s a real physical asset with little correlation to the stock market.

On a scale of -1 to +1, with 0 representing no link at all, Citi found the correlation between contemporary art and the S&P 500 was just 0.12 during the past 25 years.

Earlier this year, Bank of America investment chief Michael Harnett singled out artwork as a sharp way to outperform over the next decade — due largely to the asset’s track record as an inflation hedge.

Investing in art by the likes of Banksy and Andy Warhol used to be an option only for the ultrarich. But with a new investing platform, you can invest in iconic artworks just like Jeff Bezos and Bill Gates do.

About the Author

Jing Pan

Jing Pan

Investment Reporter

Jing is an investment reporter for MoneyWise. Prior to joining the team, he was a research analyst and editor at one of the leading financial publishing companies in North America. An avid advocate of investing for passive income, he wrote a monthly dividend stock newsletter for the better half of the past decade. Jing holds a Master’s Degree in Economics and an Honours Bachelor of Science Degree, both from the University of Toronto.

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