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 this spreadsheet had total return every 5 years starting in 1995. I noticed that between 2005 and 2012 inclusive, the 5 year total return was negative. Also, looking at long term total return, the shareholders who bought 15 and 10 years ago have the worse total return. See the chart below.
| Date | Tot. Ret | Beg Yield | Beg P/S | Beg P/E |
|---|---|---|---|---|
| 04/30/00 | 45.03% | 0.56% | 4.87 | 42.39 |
| 04/30/01 | 31.87% | 0.52% | 5.38 | 29.12 |
| 04/30/02 | 25.74% | 0.58% | 6.23 | 30.73 |
| 04/30/03 | 14.48% | 0.43% | 9.15 | 54.17 |
| 04/30/04 | 5.66% | 0.35% | 10.37 | 94.73 |
| 04/30/05 | -2.84% | 0.30% | 12.66 | 40.44 |
| 04/30/06 | -2.58% | 0.47% | 9.34 | 71.04 |
| 04/30/07 | -2.70% | 0.52% | 8.44 | 64.01 |
| 04/30/08 | -5.57% | 0.51% | 7.72 | 35.08 |
| 04/30/09 | -10.13% | 0.58% | 6.69 | 30.38 |
| 04/30/10 | -6.75% | 0.65% | 6.34 | 33.56 |
| 04/30/11 | -5.21% | 0.78% | 5.10 | 27.55 |
| 04/30/12 | -6.73% | 0.83% | 4.92 | 22.05 |
| 04/30/13 | 0.56% | 1.01% | 4.11 | 25.78 |
| 04/30/14 | 13.18% | 2.34% | 2.45 | 16.28 |
| 04/30/15 | 17.37% | 1.88% | 3.03 | 15.76 |
| 04/29/16 | 22.49% | 2.15% | 2.81 | 12.97 |
| 04/30/20 | 10.76% | 1.64% | 5.22 | 29.96 |
| 04/30/21 | 13.04% | 1.92% | 3.84 | 31.02 |
The dividend yields are low with dividend growth moderate. The current dividend yield is low (below 2%) at 1.99%. The 5 and 10 year median dividend yields are moderate (2% to 4%) at 2.22% and 2.17%. The historical median dividend yield is low at 0.93%. The current dividend increases are moderate (8% to 14% ranges) at 8.83% per year over the past 3 years. The last dividend increase was in 2022 and it was for 8.6%.
The Dividend Payout Ratios (DPR) are fine, but DPR for EPS could stand for improvement. DPR for EPS for 2021 is 87% with 5 year coverage at 68%. The DPR for CFPS for 2021 is 45% with 5 year coverage at 40%. The DPR for Free Cash Flow is 59% with 5 year coverage at 51%.
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2021 is good at 0.15. The Liquidity Ratio for 2021 is good at 2.65. The Debt Ratio for 2021is good at 2.24. The Leverage and Debt/Equity Ratios for 2021 are good at 1.81 and 0.81.
The Total Return per year is shown below for years of 5 to 31 to the end of 2020. 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. |
|---|---|---|---|---|---|
| 2015 | 5 | 8.83% | 10.97% | 8.78% | 2.19% |
| 2010 | 10 | 9.93% | 14.64% | 12.19% | 2.45% |
| 2005 | 15 | 12.62% | 6.32% | 4.85% | 1.47% |
| 2000 | 20 | 13.04% | 4.47% | 3.37% | 1.10% |
| 1995 | 25 | 15.37% | 10.50% | 8.97% | 1.53% |
| 1990 | 30 | 16.08% | 17.10% | 14.51% | 2.59% |
| 1989 | 31 | 16.13% | 17.85% | 15.09% | 2.76% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 27.27, 29.02 and 34.27. The 10 year corresponding ratios are 23.91, 28.03 and 31.47. The corresponding historical ratios are 22.67, 26.85 and 31.77. The current ratio is 31.86 based a stock price of $126.50, and EPS estimate for 2022 of $3.97. The current ratio is above the 10 year median high ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $58.48. The 10 year low, median, and high median Price/Graham Price Ratios are 1.37, 1.63 and 1.79. The current P/GP Ratio is 2.16 based on a stock price of $126.50. The current ratio is above the 10 year median high ratio. 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 ratio is 3.30 based on a stock price of $126.50, Book Value of $51,487M and a Book Value per Share of $38.29. The current ratio is 45% 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 19.68. The current P/CF Ratio is 21.59 based on Cash Flow per Share estimate for 2022 of $6.48, Cash Flow of $7,880M and a stock price of $126.50. The current P/CF Ratio is 9.7% 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 0.93%. The current dividend yield is 1.99% based on a stock price of $126.50 and dividends of $2.52. The current yield is 114% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 2.17%. The current dividend yield is 1.99% based on a stock price of $126.50 and dividends of $2.52. The current yield is 8.5% 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 3.80. The current P/S Ratio is 5.16 based on Revenue estimate for 2022 of $32,992M, Revenue per Share of $24.54 and a stock price of $126.50. The current ratio is 35.5% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
The stock price would need to get down to $110.00 for the difference between the 10 year and current P/S Ratio to be 17.9% and just within the reasonable field, but above the median. At $100.00 stock price the current P/S Ratio would be still 7% above the median 10 year ratio. The problem is that the sales are growing a lot slower than dividends. Over the past 5 years, revenue per share is up only 1.67% per year. Dividends are up by 8.83% per year. Earnings per Share is up 1.41% per year. The Dividend Payout Ratio for EPS is high at 87%.
Results of stock price testing is that the stock price is probably expensive. The dividend yield tests are showing the stock price in a reasonable range, but the P/S Ratio test does not confirm this.
Is it a good company at a reasonable price? The stock price seems on the high side, so I do not think it is currently reasonable. The company seems to have periods of good total return and periods of not good total return. (See first chart above.) The company now seems to be in a period of good total return.
When I look at analysts’ recommendations, I find Strong Buy (16), Buy (6) and Hold (6). The current consensus would be a Strong Buy. The 12 months stock price is $145.92. This implies a total return of $17.34% with 15.35% from capital gains and 1.99% from dividends.
All the recent analysts’ recommendations recently on Stock Chase are Buys or Top Pick. David Jagielski on Motley Fool thinks this stock provides safety and cash flow. The executive summary on Simply Wall Street gives this stock 4 stars out of 5 and lists two risks. A writer on Simply Wall Street is not particularly enthused about Medtronic from a dividend perspective. A writer on Simply Wall Street talks about institutional ownership of this stock. Analysts on Investor Observer says that this company is near the top in its industry group.
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 North West Company (TSX-NWC, OTC-NWTUF) ... learn more. The next stock I will write about will be Equitable Group Inc (TSX-EQB, OTC-EQGPF) ... learn more on Tuesday, October 12, 2021 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.
See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
No comments:
Post a Comment