Is it a good company at a reasonable price? The stock price is cheap. You would buy this stock if you want to diversify into Health Care stocks. Mostly, over the longer term, this stock has delivered good results. They also have a habit of increasing their dividends.
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 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 this stock is down 20% year to date.
I noticed that this spreadsheet had total return every 5 years starting in 1995 for Canadians in CDN$. (Returns will be slightly different in US$ due to the exchange rate.) 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.
| End Date | Tot. Ret | Beg Yd | Beg P/S | Beg P/E | Beg Date |
|---|---|---|---|---|---|
| 04/30/00 | 45.03% | 0.56% | 4.87 | 42.39 | 04/30/95 |
| 04/30/01 | 31.87% | 0.52% | 5.38 | 29.12 | 04/29/96 |
| 04/30/02 | 25.74% | 0.58% | 6.23 | 30.73 | 04/29/97 |
| 04/30/03 | 14.48% | 0.43% | 9.15 | 54.17 | 04/29/98 |
| 04/29/04 | 5.66% | 0.35% | 10.37 | 94.73 | 04/29/99 |
| 04/29/05 | -2.84% | 0.30% | 12.66 | 40.44 | 04/28/00 |
| 04/29/06 | -2.58% | 0.47% | 9.34 | 71.04 | 04/28/01 |
| 04/29/07 | -2.70% | 0.52% | 8.44 | 64.01 | 04/28/02 |
| 04/28/08 | -5.57% | 0.51% | 7.72 | 35.08 | 04/28/03 |
| 04/28/09 | -10.13% | 0.58% | 6.69 | 30.38 | 04/27/04 |
| 04/28/10 | -6.75% | 0.65% | 6.34 | 33.56 | 04/27/05 |
| 04/28/11 | -5.21% | 0.78% | 5.10 | 27.55 | 04/27/06 |
| 04/27/12 | -6.73% | 0.83% | 4.92 | 22.05 | 04/27/07 |
| 04/27/13 | 0.56% | 1.01% | 4.11 | 25.78 | 04/26/08 |
| 04/27/14 | 13.18% | 2.34% | 2.45 | 16.28 | 04/26/09 |
| 04/27/15 | 17.37% | 1.88% | 3.03 | 15.76 | 04/26/10 |
| 04/26/16 | 22.49% | 2.15% | 2.81 | 12.97 | 04/26/11 |
| 04/26/17 | 25.19% | 2.54% | 2.45 | 11.22 | 04/25/12 |
| 04/26/18 | 19.19% | 2.23% | 2.86 | 14.35 | 04/25/13 |
| 04/26/19 | 15.60% | 1.90% | 3.46 | 19.00 | 04/25/14 |
| 04/25/20 | 10.76% | 1.64% | 5.22 | 29.96 | 04/25/15 |
| 04/25/21 | 13.04% | 1.92% | 3.84 | 31.02 | 04/24/16 |
| 04/25/22 | 6.69% | 2.07% | 3.83 | 28.75 | 04/24/17 |
If you had invested in this company in December 2011, for $1,021.02 CDN$ you would have bought 27 shares at $37.82 per share. In December 2021, after 10 years you would have received $590.39 in dividends. The stock would be worth $3,431.38. Your total return would have been $4,021.77 CDN$. This assuming all your transactions were translated into CDN$.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $37.82 | $1,021.02 | 27 | 10 | $590.39 | $3,431.38 | $4,021.77 |
If you had invested in this company in December 2011, for $1,001.53 US$ you would have bought 27 shares at $38.25 per share. In December 2021, after 10 years you would have received $471.42 in dividends. The stock would be worth $2,793.15. Your total return would have been $3,264.57 US$.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $38.25 | $1,032.75 | 27 | 10 | $471.42 | $2,793.15 | $3,264.57 |
The dividend yields are moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 3.30%. The 5 and 10 year median dividend yields are also moderate at 2.22% and 2.11%. The historical median dividend yield is low (below 2%) at 0.95%. This is because dividend yields were below 2% from my earliest date of 1990 to 2008. The dividend increases for the last 5 years at 7.9% per year have been in the low range (less than 8%). However, past dividend increases were higher as you can see in the chart below.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2022 is 68% with 5 year coverage at 69%. I do have Adjusted Earnings per Share (AEPS) or Non-GAAP Profit. The DPR for P/AEPS for 2022 is 45% with 5 year coverage also at 45%. The DPR for Cash Flow per Share is 41% with 5 year coverage also at 41%. The DPR for Free Cash Flow for 2022 is 48% with 5 year coverage at 53%.
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2022 is good at 0.15. The Liquidity Ratio for 2022 is good at 1.86. The Debt Ratio is good at 2.38. The Leverage and Debt/Equity Ratios are good at 1.73 and 0.73.
The Total Return per year is shown below for years of 5 to 31 to the end of 2021 in US$. 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. |
|---|---|---|---|---|---|
| 2016 | 5 | 7.94% | 10.35% | 7.75% | 2.61% |
| 2011 | 10 | 10.02% | 13.26% | 10.46% | 2.80% |
| 2006 | 15 | 12.34% | 6.35% | 4.54% | 1.81% |
| 2001 | 20 | 12.72% | 4.98% | 3.58% | 1.40% |
| 1996 | 25 | 14.01% | 9.25% | 7.56% | 1.69% |
| 1991 | 30 | 15.92% | 13.21% | 11.06% | 2.15% |
| 1989 | 32 | 15.89% | 17.23% | 14.15% | 3.09% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 32.65, 34.45, and 36.24. The corresponding 10 year ratios are 25.20, 28.83 and 32.53. The corresponding historical ratios are 23.44, 27.13 and 31.82. The current P/E Ratio is 19.72 based on a stock price of $82.42 and EPS estimate for 2023 of $4.18. The current ratio is below the low of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I have Adjusted Earnings per Share (AEPS) data, or non-GAAP data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 17.41, 21.16 and 24.35. The corresponding 10 year ratios are 15.95, 17.79 and 19.02. The current ratio is 14.90 based on AEPS estimate for 2023 of $5.53 and a stock price of $82.42. The current ratio is below the low of the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $60.68. The 10-year low, median, and high median Price/Graham Price Ratios are 1.45, 1.70 and 1.84. The current P/GP Ratio is 1.36 based on a stock price of $82.42. The current ratio is below the low of the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10-year median Price/Book Value per Share Ratio of 2.34. The current P/B Ratio is 2.11 based on a Book Value of $52,673M, Book Value per Share of $39.15 and a stock price of $82.42. The current P/B Ratio is 10% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I have Book Value per Share estimates for 2023. The estimate for the Book Value per Share of $41.20, gives us a ratio of 2.00 based on a Stock Price of $82.42. The Book Value would be 55,431M. This ratio of 2.00 is 15% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 18.67. The current P/CF Ratio is 15.55 based on a stock price of $82.42, Cash Flow per Share estimate for 2023 of $5.30 and a Cash Flow of $7,131M. The current ratio is 17% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 0.95%. The current dividend yield is 3.30% based on a dividend of $2.72 and a stock price of $82.42. The current dividend yield is 247% above the historical median dividend yield. This stock price testing suggests that the stock price is cheap. The historical dividend yield is so low because dividend yields are a lot lower prior to 2008.
I get a 10 year median dividend yield of 2.11%. The current dividend yield is 3.30% based on a dividend of $2.72 and a stock price of $82.42. The current dividend yield is 57% above the 10 year median dividend yield. This stock price testing suggests that the stock price is cheap.
The 10-year median Price/Sales (Revenue) Ratio is 3.90. The current P/S Ratio is 3.50 based on a stock price of $82.42, Revenue estimate for 2023 of $31,661M, and Revenue per Share of $23.53. The current ratio is 10% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is cheap. The dividend yield testing is saying that the stock price is cheap. The P/S Ratio test says it is reasonable. However, revenue is expected to decline as we are expected to go into a recession. In this case, I would go with the dividend yield testing. A lot of the other tests are showing that the stock price is relatively cheap.
When I look at analysts’ recommendations, I find Strong Buy (12), Buy (2), Hold (2) and Sell (1). This is quite a range. The consensus would be a Buy. The 12 month target consensus is $106.74. This implies a total return of $32.81% with 29.51% from capital gains and 3.30% from dividends based on a current stock price of $82.42.
Analysts have various opinion on Stock Chase about this stock. Stock Chase gives this stock 4 stars out of 5. It is on the list of US Dividend Champions. Jeff Little on Motley Fool says analysts don't seem fazed by the year-over-year revenue decline. David Jagielski on Motley Fool reviews this stock and thinks it is a buy. Medtronic issues a Press Release on their fourth quarter results. The company issues a Press Release on their first quarter of 2023 results. Simply Wall Street via Yahoo Finance reviews this stock. Simply Wall Street lists no risks for this stock.
Medtronic PLC is headquartered in Dublin, Ireland. The company currently generates revenues from four major segments - namely Cardiovascular Portfolio, Medical Surgical Portfolio, Neuroscience Portfolio and Diabetes. 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 EQB Inc (TSX-EQB, OTC-EQGPF) ... learn more on Friday, October 14, 2022 around 5 pm. Tomorrow on my other blog I will write about Noah Smith - Substack.... learn more on Thursday, October 13, 2022 around 5 pm.
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