Monday, June 8, 2009

Medtronic Inc.

I am reviewing this stock (NYSE-MDT) as I am looking for a US stock for my US currency account. Currently I have Barclays Bank in this account. Barclays is also not doing well currently, and I do not see this changing anytime soon. Also, as I already have too much in the Financial Services sector, and I want to reposition my portfolio. What better time to do this than when the market is low. Prices in the market are always relative. If in a low market I sell stocks low, I also buy stocks low. Selling a stock at a relatively low price also lowers capital gain taxes.

So, from my point of view, the time to reposition a portfolio is when the market is low. I also will sell when I find something I like better than what I got now. In looking at possible stocks to invest in, I did a spreadsheet on this stock. However, looking over the spreadsheet after I completed it, I decided that this is not a stock for me. First, I should talk about what is good about this stock.

This stock has great growth in revenue, earnings, dividends, cash flow, and book value over the last 5 and 10 years. I always like stock with good dividend growth and this stock, over the last 5 years has had dividend growth of almost 15% per year. The only negative as far as growth figures goes, is the stock price, which has really stalled over the last 5 years, and if you look at a 10 year period, the stock price has only increase some 7.7% per year in US$. This is not entirely that bad a figure, but it is not a great figure either. Of course, being a Canadian, I will have made even less money because of the currency exchange rates over the last 5 and 10 years.

Another positive of this stock is both the liquidity and the Asset/Liability are very good at around 2.08. These ratios point to a strong Balance Sheet. The Return on Equity is also very good at 22%. The negatives I see for this company is the high Accrual Ratio, which at 6.9% is high than I would like and the low stock price growth. I, of course, also do not like the low yield as I have said earlier.

The management of this company obviously feels the company is in good shape as they raised the dividend some 50% for 2009. However, what I do not like about the dividend is the very low yield. The 5 year average is .7%, but it is only this high because the stock price has stalled over the last 5 years. When dividends yields are so low, I wonder if I am really investing or really speculating. In normal times, it would seem that this stock gives a dividend yield of about ½ of 1%. This would mean that to earn decent money on this stock, you are really relying mostly on stock appreciation.

However, I can see why this stock might be a favorite stock of some. It does have some very good points. But, at the present, I have no intentions of buying this stock. Since I have done a spreadsheet on this stock, I will publish it and also finish my review, by looking to see what analysts are saying about this stock, tomorrow.

Medtronic is the world's leading medical technology company, pioneering device-based therapies that restore health, extend life and alleviate pain. Primary products include those for bradycardia pacing, tachyarrhythmia management, atrial fibrillation management, among others. Medtronic operates its business in one reportable segment, that of manufacturing and selling device-based medical therapies. The company does business in more than 120 countries. The company's product lines include cardiac rhythm management, neurological and spinal, vascular and cardiac surgery. Its web site is See my spreadsheet at

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at for a list of the stocks for which I have put up spreadsheets.

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