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 on my spreadsheet, that the 5 year Internal Rate of Return (IRR) calculations ending between 2005 and 2012 for Canadian were negative. Prior to that the IRR was positive and after 2012 they were again positive. For example, the 5 year IRR ending in 2012 was negative 6.73% total return. The 5 year IRR ending in 2020 was 10.76%. These IRR are in Canadian currency. However, you get a similar result in US$.
Also, over the past couple of years, the earnings are going up, but revenue is not. The cash flow is going up but the Book Value is not. Earnings are up 50.22% and 3.81 for the past couple of years. Revenue is up by 2.02 and down by 5.38% over the past 2 years. Cash Flow is up 49.59% and 3.24% over the past two years. Book Value is down by 0.24% and up by 1.26% over the past two years.
The dividend yields are low to moderate with dividend growth moderate. The current dividend yield is moderate (2% to 4% ranges) at 2.32%. The 5 and 10 year median dividend yields are moderate (2% to 4% ranges) at 2.22% and 2.22%. The historical median dividend yield is low at just 0.91%. The dividend increases for the past 5 years is moderate (8% to 14% ranges) at 12.10% per year. The most recent dividend increase is low (below 8%) at 7.4% and the increase was made in 2020.
The Dividend Payout Ratios (DPR) are fine but are going higher. The DPR for EPS for 2019 is 61% with 5 year coverage at 63%. The DPR for CFPS for 2019 is 40% with 5 year coverage at 38%. The DPR for Free Cash Flow 48% with 5 year coverage at 50%. The Dividend Coverage Ratio for 2019 is 2.08 with 5 year coverage at 2.01. The is agreement on what the FCF is.
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2019 is 0.17 and is good. The Liquidity Ratio for 2019 is good at 2.13. The Debt Ratio is good at 2.28. Leverage and Debt/Equity Ratios at 1.79 and 0.78 are also good.
The Total Return per year is shown below for years of 5 to 30 to the end of 2019. 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. |
|---|---|---|---|---|---|
| 2014 | 5 | 12.10% | 11.58% | 9.46% | 2.12% |
| 2009 | 10 | 10.17% | 11.99% | 9.94% | 2.05% |
| 2004 | 15 | 13.12% | 7.09% | 5.66% | 1.43% |
| 1999 | 20 | 13.90% | 7.08% | 5.85% | 1.23% |
| 1994 | 25 | 16.12% | 10.25% | 8.87% | 1.38% |
| 1989 | 30 | 16.43% | 18.15% | 15.51% | 2.63% |
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 22.02, 26.87 and 29.97. The corresponding historical ratios are 21.91, 26.57 and 31.72. The current P/E Ratio is 36.97 based on a stock price of $108.68 and EPS estimate for 2021 of $2.94. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $49.77. The 10 year low, median, and high median Price/Graham Price Ratios are 1.32, 1.56 and 1.75. The current P/GP Ratio is 2.18 based on a stock price of $108.68. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Book Value per Share Ratio of 2.28. The current P/B Ratio is 2.90 based on a Book Value of $50,296M, Book Value per Share of $37.44 and a stock price of $108.68. The current P/B Ratio is 27% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Cash Flow per Share Ratio of 18.02. The current P/CF Ratio is 37.48 based on Cash Flow per Share estimate for 2020 of $2.90, Cash Flow of $3,896M and a stock price of $108.68. The current ratio is 108% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 0.91%. The current dividend yield is 2.13% based on dividends of $2.32 and a stock price of $108.68. The current dividend is 135% 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 2.22%. The current dividend yield is 2.13% based on dividends of $2.32 and a stock price of $108.68. The current dividend is 4% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10 year median Price/Sales (Revenue) Ratio is 3.62. The current P/S Ratio is 5.02 based on Revenue estimate for 2021 of $29,086M, Revenue per Share of $21.65 and a stock price of $108.68. The current P/S Ratio is 39% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is probably expensive. The stock price shows the best with the dividend yield tests. However, that testing was not confirmed by the P/S Ratio test. In 2009, the dividends were increased by 50% and this led to higher dividend yields. Prior to 2009, dividend yields were mostly 1% and under and after 2009 they were in the 2% range. DPRs have been climbing. For example, the DPR for EPS in 2016 was 39% and in 2020 was 61% and is expected to be 79% in 2021. All the other tests are showing the stock price as expensive.
Is it a good company at a reasonable price? It would appear that the current stock price is on the expensive side. Analysts expect the company to recover in 2022, but you have to wonder if this will make up for overpaying for the stock now. If you buy for the long term as I do, paying too much can really affect your long term return on a company. I think that this is a good health care company to invest in, but I think that now may not be the time to buy.
When I look at analysts’ recommendations, I find Strong Buy (16), Buy (6), Hold (4), and Underperform (1). The consensus would be a Buy. The 12 month stock price consensus is $118.00. This implies a total return of $10.71% with 8.58% from capital gains and 2.13% from dividends.
The analysts seem to like this stock on Stock Chase. Prosper Junior Bakiny on Motley Fool says this company’s stock will be volatile in the short term but it is a good time to buy. A writer on Simply Wall Street says that the P/E of this company at 25.62 is lower than the industry average of 44.7. A writer on Simply Wall Street says that the interest on this company’s debt is only covered by EBIT by 6.5 times. Ken Faulkenberry on Dividend Value Builder rates this stock a B.
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. 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 Friday, October 16, 2020 around 5 pm. Tomorrow on my other blog I will write about Best Stocks I Follow 2.... learn more on Thursday, October15, 2020 around 5 pm.
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