Medtronic Inc

I do not own this stock (NYSE-MDT). This is one of a few US stocks that I track. I track it because it is in the Health sector. Except for whether or not as I Canadian I would have made any money on this stock, my spreadsheet is in US$ only.

First I will give you the bad news. If I was invested in this company, as a Canadian, there is not 5 year period since 2004 that I would have made a positive return. And, in 2004 the 5 year total return would only have been 5.7%. I am including dividend payments in these statements.

Both my 5 and 10 year total return as a Canadian would have been negative, with loss at 6.7% per year and 4.68% per year, respectively. Dividends are very low and the portion dividends would have been at 1.67% and 1.23% per year over the past 5 and 10 years.

Americans would have done a bit better with 5 year loss at 4.6% and 10 year loss or gain at 0%. Their dividend income would also be a bit better at 1.72% and 1.36% per year. The main reason for the decline is the change in the Price/Earnings Ratio. 10 years ago P/E Ratio was just under 60.00. Today P/E Ratio is just over 10. It is obvious that investors are only willing to pay a lot less today for each $1 this company earns than they were 10 years ago.

The current dividend yield is rather good at 2.6% per year. This is a rather high yield for this company, which spent many years with the dividend yield under 1%. The 5 year median dividend yield is 2.1% and the 10 year median dividend yield is lower at 0.9%.

However, dividends have grown well at 17% and 15.5% per year. This is quite good growth. The Dividend Payout Ratios are also quite good with the 5 year median DPR at 31.5% for earnings and 22% for cash flow. The DPRs have been increasing lately. The 10 year median DPR for earnings is at 24% and for cash flow is at 18.6%.

Even though shareholders have made no money over the past 5 and 10 years, the company has had moderate to good growth. The revenue has grown over the past 5 and 10 years at 5.6% and 9.7% per year. The 5 and 10 year growth in revenue per share has grown better at 7.7% and 11.5% per year. Per share revenue has grown better because the number of shares outstanding has been coming down marginally each year (at just under 2% per year).

The growth in Earnings per Share has also been quite decent with the 5 and 10 year growth at 7.2% and 15.6% per year. Cash flow per share is not quite as good as its 5 and 10 year growth is at 7.4% and 10.7% per year, respectively. Book Value growth is good with 5 and 10 year growth at 11.4% and 12% per year, respectively.

The Return on Equity has been good for this company with the year ending April 2012 ROE at 21.1%. The 5 year median ROE is also very good and it is also at 21.1%. An ROE from 10% to 15% is considered good. A sustained percentage above 20% is considered above average.

The debt ratios on this company are also quite good, with current Liquidity Ratio at 1.56 and the Debt Ratio at 2.07. What you want with these ratios are ones at or above 1.50. The current Leverage Debt/Equity Ratios are also very good at 1.93 and 0.93. Here the lower the ratio the better.

This company has the characteristic of a company transitioning from a growth company to a mature company. If the company continues to make the same progress on revenues, earnings and cash flow, shareholders could expect to see some profit in the future. However, we might be heading for a recession, so better times for the shareholders may still be a bit further into the future.

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 here Medtronic. See my spreadsheet at mdt.htm.

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 for stocks followed and investment notes. Follow me on twitter.