I do not own this stock of Medtronic PLC (NYSE-MDT). In 2009 I was looking for a good US stock for my US dollar 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 financial year ends in April 30 each year. I also noticed shares have increased by 5.92% and 1.87% per year over the past 5 and 10 years. Most of the increase was in 2015 due to an acquisition. So, to see what the real growth is you have to look at the per share values.
I see that revenue per share growth over the past 5 years is about the same as over the past 10 years, but EPS growth is much lower and negative. The Revenue per share for the past 5 and 10 years is 6.26% and 6.29% per year. EPS are down by 7.60% per year over the past 5 years, but up by 1.53% over the past 10 years. Because EPS are volatile, the 5 year running averages are probably a better measure. Over the past 5 years, the 5 year running average shows EPS are down by 1.86% and the over the past 10 year, the 5year running average is up by 3.21%.
Currently the dividend yield is moderate. However, it used to be a lot lower. The current dividend yield, 5 year median and 10 year medians are 2.09%, 2.06% and 2.11%. These are moderate dividend yields. However, the historical median dividend yield is low at 0.74%.
Dividend growth is moderate currently, but it used to be high. For the 5 to 15 years, dividend growth is from 12% to 14% growth per year. Prior to this it was 15% to 17% per year. See chart below.
They can cover their dividends with earnings, but for the financial year ending in April 2018 it is high for this sort of company. I would like to see it 60% or lower. For 2018 Dividend Payout Ratio for EPS is 81% with 5 year cover at 57%. The 5 year coverage is what counts really so on this basis the coverage is fine. The DPR for CPFS for 2018 is also high at 51% where I would like to see it at 40% or lower. The 5 year coverage is fine at 37%.
All the debt ratios on this stock are quite good. The Long Term Debt/Market Cap Ratio is good at 0.22. the Liquidity Ratio for 2018 is 2.28 and the Debt Ratio is 2.25. The Leverage and Debt/Equity Ratios for 2018 are good at 1.80 and 0.80 respectively.
The Total Return per year is show below for years of 5 to 28. 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 charts below.
In most years, this stock has been a good investment for shareholders. For shareholders to bought this stock exactly 10, 15 and 20 years ago, P/E Ratios were high and yields low. These were years of 2008, 2002 and 2098. P/E Ratios were 25.78, 35.08 and 54.17 and Yields were 1.01%, 0.51% and 0.43%. Although the P/E Ratios and yields were not that bad 10 years ago, it was just before the last recession and it took the stock awhile to recover.
This stock was often overvalued of high ratios and low yields, but if you bought it when the price was at least reasonable, I think you would have made money.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | 12.09% | 17.22% | 14.51% | 2.71% |
| 10 | 13.92% | 6.69% | 4.85% | 1.84% |
| 15 | 14.23% | 5.30% | 3.88% | 1.41% |
| 20 | 15.13% | 7.17% | 5.83% | 1.34% |
| 25 | 17.17% | 14.21% | 12.17% | 2.03% |
| 28 | 17.03% | 18.01% | 15.30% | 2.72% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 26.02, 29.02 and 32.17. The corresponding 10 year ratios are 14.04, 19.50 and 24.95. The corresponding historical ratios are 21.91, 26.57 and 31.72. The current P/E Ratio is 25.29 based on a stock price of $95.86 and 2019 EPS estimate of $3.79. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $56.29. The 10 year low, median, and high median Price/Graham Price Ratios are 1.19, 1.51 and 1.73. The current P/GP Ratio is 1.70 based on a stock price of $95.86. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median Price/Book Value per Share Ratio of 2.28. The current P/B Ratios is 2.58 based on a Book Value of $50,244M, Book Value per Share of $37.16 and a stock price of $95.86. The current ratio is some 13% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 0.74. The current dividend yield is 2.09% based on dividends of $2.00 and a stock price of $95.86. The current dividend yield is some 182% above the historical yield. This stock price testing suggests that the stock price is relatively cheap.
However, the yields have been much higher over the past 10 years. Sometime companies increase their Dividend Payout Ratios and yields as they mature. Certainly, the paying of dividends has changed over the past 10 years. The 10 year dividend yield is 2.11%. The current yield is some 1% above the current dividend yield. This stock price testing suggests that the stock price is relatively reasonable and around the median.
The 10 year median Price/Sales (Revenue) Ratio is 3.15. The current P/S Ratio is 4.25 based on 2019 Revenues of $30,472M, Revenue per Share of $22.54 and a stock price of $95.86. The current ratio is some 35% above the 10 year ratio. This stock price testing suggests that the stock price is relatively expensive.
It would seem from my stock price testing that the stock price might be reasonable, but it is above the median. Certainly, the P/S Ratio is a good one and it is showing the stock as expensive. Even though my favourite test is the dividend yield, I think that using historical dividend yield is probably not a good measure of where the current yield is at now.
When I look at analysts’ recommendations I find Strong Buy (6), Buy (8) and Hold (12). The consensus would be a Buy. The 12 month stock price is $103.90. This implies a total return of 10.47% with 8.39% from capital gains and 2.09% from dividends.
Gemma Cottrell on Fairfield Current talks about recent institutional buying and selling of this stock. Kenneth on Wall Street Morning talks about this stocks moving averages and relative strength index. Wealth Insights blogger on Seeking Alpha does a review of this stock. Brian Feroldi on Motley Fool talks about why you should buy this stock. See what analysts are saying about this stock on Stock Chase. they mostly like this company.
Medtronic Public Limited Company, headquartered in Dublin, Ireland, is among the world's largest medical technology, services, and solutions companies - alleviating pain, restoring health, and extending life for millions of people around the world. The company is focused on collaborating with stakeholders around the world to take healthcare Further, Together. Its web site is here Medtronic PLC.
The last stock I wrote about was about was Canadian Pacific Railway (TSX-CP, NYSE-CP) ... learn more. The next stock I will write about will be Equitable Group Inc. (TSX-EQB, OTC-EQGPF) ... learn more on Monday, October 22, 2018 around 5 pm.
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. 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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