Is it a good company at a reasonable price? The analyst’s consensus comes to a Buy, but the recommendations run from Strong Buy to Sell. There is a huge amount of difference in what analysts think about this stock at present. Even so, most analysts have positive remarks on this company. This stock is a Health Care stock and there are few of these in Canada. My testing is showing that the stock price is relatively reasonable. It maybe cheap, because the dividend tests say so.
I do not own this stock of Medtronic PLC (NYSE-MDT). In 2009 I was looking for a good US stock for my US$ account. I had heard good things about this stock and also it is in Health Care sector which is a weak sector in Canada. This is one of the few US stocks that I follow.
When I was updating my spreadsheet, I noticed that the last two dividend increases have been very low. Last year the increase was for 1.47% and this year for 1.45%. If you look at the past, 10 years ago and earlier, Dividend Payout Ratios were lower in to 20% to 30% ranges. About 10 years ago, the DPRs increased to 50% to 60% and lately 90% to 100%. This might account for the much lower dividend increases. However, the DPR for Adjusted Earnings per Share is much better in the 40% to 50% ranges.
This company has a financial year ending each year at April 30. Therefore, the financial year I am reviewing is for April 30, 2024. I am also updating my spreadsheet for the first quarter of 2025 of July 2024.
In the chart below, I am showing 5 and 10 year total growth and per year growth in columns 3 and 4. Column 5 shows growth expected over 12 months to the first quarter in 2024 and expected growth over this year. For this year analysts are expecting some growth in Revenue and AEPS, and some good growth in Net Income and Cash Flow.
| Yr | Item | Tot. Gwth | Per Year | Gwth | Coverage |
|---|---|---|---|---|---|
| 5 | Revenue Growth | 5.91% | 1.16% | -23.47% | <-12 mths |
| 5 | AEPS Growth | 13.29% | 2.53% | 46.73% | <-12 mths |
| 5 | Net Income Growth | -21.23% | -4.66% | 6.88% | <-12 mths |
| 5 | Cash Flow Growth | -3.14% | -0.64% | 0.31% | <-12 mths |
| 5 | Dividend Growth | 38.00% | 6.65% | 1.45% | <-12 mths |
| 5 | Stock Price Growth | -9.65% | -2.01% | 8.87% | <-12 mths |
| 10 | Revenue Growth | 90.32% | 6.65% | 3.76% | <-this year |
| 10 | AEPS Growth | 28.62% | 2.55% | 4.81% | <-this year |
| 10 | Net Income Growth | 19.02% | 1.76% | 40.98% | <-this year |
| 10 | Cash Flow Growth | 36.86% | 3.19% | 23.10% | <-this year |
| 10 | Dividend Growth | 146.43% | 9.44% | 1.70% | <-this year |
| 10 | Stock Price Growth | 36.42% | 3.15% | 18.41% | <-this year |
If you had invested in this company in December 2013, for $1,033.02 you would have bought 18 shares at $57.39 per share. In December 2023, after 10 years you would have received $374.04 in dividends. The stock would be worth $1,482.84. Your total return would have been $1,856.88. This would be a total return of 6.67% per year with 3.68% from capital gain and 2.99% from dividends. This is in US$.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $57.39 | $1,033.02 | 18 | 10 | $374.04 | $1,482.84 | $1,856.88 |
The current dividend yield is moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 3.21%. The 5 and 10 year median dividend yields are also moderate at 2.22% and 2.17%. The historical median dividend yield is low (below 2%) at 0.96%. The last dividend increase was in 2024 and it was for 1.45%.
The Dividend Payout Ratios (DPR) could be better. The DPR for 2023 for Earnings per Share (EPS) is far too high at 100% with 5 year coverage at 80%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is fine at 53% with 5 year coverage at 49%. The DPR for 2023 for Cash Flow per Share (CFPS) is too high at 51% with 5 year coverage at 46%. The DPR for 2023 for Free Cash Flow (FCF) is too high at 71% with 5 year coverage at 63%. There is some agreement on what the FCF is.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 100.00% | 80.46% |
| AEPS | 53.08% | 49.84% |
| CFPS | 50.52% | 45.59% |
| FCF | 70.50% | 62.55% |
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2023 is good at 0.22 and currently at 0.22. The Liquidity Ratio for 2023 is good at 2.03 and 2.13 currently. The Debt Ratio for 2023 is good at 2.27 and 2.16 currently. The Leverage and Debt/Equity Ratios for 2023 are good at 1.79 and 0.79 and currently at 1.87 and 0.87.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.22 | 0.22 |
| Intang/GW | 0.51 | 0.45 |
| Liquidity | 2.03 | 2.13 |
| Liq. + CF | 2.32 | 2.58 |
| Debt Ratio | 2.27 | 2.16 |
| Leverage | 1.79 | 1.87 |
| D/E Ratio | 0.79 | 0.87 |
The Total Return per year is shown below for years of 5 to 34 to the end of 2023 in US$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2018 | 5 | 6.65% | 0.89% | -1.96% | 2.85% |
| 2013 | 10 | 9.44% | 6.67% | 3.68% | 2.99% |
| 2008 | 15 | 9.07% | 9.82% | 6.64% | 3.18% |
| 2003 | 20 | 11.92% | 4.66% | 2.67% | 1.98% |
| 1998 | 25 | 13.00% | 5.00% | 3.26% | 1.74% |
| 1993 | 30 | 14.93% | 13.86% | 10.60% | 3.26% |
| 1989 | 34 | 15.19% | 16.30% | 12.50% | 3.80% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 27.00, 32.34 and 36.24. The corresponding 10 year ratios are 26.51, 29.06 and 33.57. The corresponding historical ratios are 23.47, 27.43 and 32.17. The current ratio is 21.75 based on a stock price of $87.36 and EPS estimate for 2024 of $4.02. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I also have Adjusted Earnings per Share data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 15.89, 21.16 and 24.35. The corresponding 10 year ratios are 15.95, 17.79 and 19.71. The current ratio is 16.03 based on a stock price of $87.36 and AEPS estimate for 2024 of $5.45. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $66.47. The 10-year low, median, and high median Price/Graham Price Ratios are 1.19, 1.35 and 1.50. The current P/GP Ratio is 1.31 based on a stock price of $87.36. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10-year median Price/Book Value per Share Ratio of 2.32. The current P/B Ratio is 2.42 based on a stock price of $87.36, Book Value of $47,947M and Book Value per Share of $36.03. The current ratio is 4.5% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I also have a Book Value per Share estimate for 2025 of $38.64. This implies a ratio of 2.26 with a stock price of $87.36 and Book Value of $51,423M. This ratio is 2.6% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 19.68. The current P/CF Ratio is 13.92 based on Cash Flow per Share estimate for 2025 of $6.28, Cash Flow of $8,355M and a stock price of $87.36. The current ratio is 29% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 0.96%. The current dividend yield is 3.21% based on dividends of $2.80 and a stock price of $87.36. The current dividend yield is 234% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 2.17%. The current dividend yield is 3.21% based on dividends of $2.80 and a stock price of $87.36. The current dividend yield is 48% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10-year median Price/Sales (Revenue) Ratio is 3.91. The current P/S Ratio is 3.46 based Revenue estimate for 2025 of $33,582M, Revenue per Share of $25.23 and a stock price of $87.36. The current ratio is 11% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is testing as reasonable, but could be cheap. Both the dividend yield tests show the stock price as cheap. However, the P/S Ratio test is showing the stock price as reasonable, but below the median. Most of the rest of the testing is showing the stock price as relative reasonable or cheap.
When I look at analysts’ recommendations, I find Strong Buy (11), Buy (5), Hold (15), Underperform (1), Sell (1). The consensus would be a Buy. The 12 month stock price consensus is $95.01 with a high of $112.00 and low and $82.00. The consensus stock price of $95.01 implies a total return of 11.96% with 8.76% from capital gains and 3.21% from dividends based on a current stock price of $87.36.
There are 6 analysts on Stock Chase giving this stock a buy rating. Stock Chase gives this stock 5 stars out 5. There is one Sell recommendation for 2023 and the analyst says there are better names out there. Rachel Warren on Motley Fool thinks stock is an unbeatable dividend stock. David Jagielski on Motley Fool thinks this stock will rally higher. The company put out a Press Release about its year end results for April 2024. The company put out a Press Release about their first quarter in 2025.
Simply Wall Street via Yahoo Finance put out a review on this stock. Simply Wall Street gives two warnings on this stock of dividend of 3.11% is not well covered by earnings; and has a high level of debt. Simply Wall Street gives this stock 3 and one half stars out of 5.
Medtronic, Inc. acquired Ireland-based Covidien plc. The acquisition resulted in the formation of a new holding company incorporated in Ireland - Medtronic plc. The company currently generates revenues from four major segments - namely Cardiovascular Portfolio, Medical Surgical Portfolio, Neuroscience Portfolio and Diabetes. The Cardiovascular Portfolio, formerly reported as the Cardiac and Vascular Group, includes the Cardiac Rhythm & Heart Failure, Structural Heart & Aortic and Coronary & Peripheral Vascular divisions. Its web site is here Medtronic PLC.
The last stock I wrote about was about North West Company (TSX-NWC, OTC-NWTUF) ... learn more. The next stock I will write about will be EQB Inc (TSX-EQB, OTC-EQGPF) ... learn more on Wednesday, October 9, 2024 around 5 pm. Tomorrow on my other blog I will write about Plan for Retirement.... learn more on Tuesday, October 8, 2024 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
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