Is it a good company at a reasonable price? It may be in Health Care, but over time this stock does not often produce a reasonable return on investment. Look at the Total Return chart below. After holding this stock for 15, 20 or 25 years in 2022, the total return was below 8% per year. I looked at 4 of the past years and in 3 of those years, the total return was less than 8%. Certainly, a negative is that the dividends increase for 2024 was just 1.5%. This points to expected future slow growth by the company. Personally, this would not be a stock I am interested in. However, the stock seems to be relatively cheap currently.
In one part of my spreadsheet, I was looking at total return over the past 5 years. I did this from 1995, 29 years ago. Over these 29 years, 4 years had a 5 year period with a negative return and 13 years had a total return less than 8%. Those 4 years was in the years from 2009 to 2012.
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. This stock has a financial year ending April 30 each year, so I am reviewing the financial year ending April 30, 2023.
When I was updating my spreadsheet, I noticed dividend increases have steadily gotten lower over time. The first increase in the spreadsheet is for 1991 and it is for 17.8%. Last year, 2022, the increase was 7.9% and this year it is 1.5%. See chart below with increases over the past 33 years to past 5 years. The rates given are per year during the period. However, the dividend yields back in 1991 was below 1%. The dividend yield hit 1% in 2007 and 2% in 2010.
| Item | Rate | Period |
|---|---|---|
| Dividends | 8.13% | 5 |
| Dividends | 10.09% | 10 |
| Dividends | 11.95% | 15 |
| Dividends | 12.68% | 20 |
| Dividends | 13.69% | 25 |
| Dividends | 15.62% | 30 |
| Dividends | 15.64% | 33 |
The current dividend yield is moderate with dividend growth low. This is the best combination of dividend yield and growth, that is both being moderate. The current dividend yield is moderate (2% to 4% ranges) at 3.68%. 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 0.96%. The dividend growth is moderate (8% to 14% ranges) at 8.1% per year over the past 5 years.
The Dividend Payout Ratios (DPR) are too high and it would be better if they were lowered. The DPR for 2023 for Earnings per Share (EPS) is 96% with 5 year coverage at 73%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is 51% with 5 year coverage at 48%. The DPR for 2023 for Cash Flow per Share (CFPS) is 52% with 5 year coverage at 42%. The DPR for 2023 for Free Cash Flow (FCF) is 79% with 5 year coverage at 57%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 96.45% | 72.52% |
| AEPS | 51.42% | 47.94% |
| CFPS | 51.66% | 41.94% |
| FCF | 78.95% | 57.45% |
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2023 is 0.20 and is good and low. The Liquidity Ratio for 2023 is good at 2.39 and good currently still at 1.58. The Debt Ratio is good for 2023 at 2.32. The Leverage and Debt/Equity Ratios are good at 1.77 and 0.76 respectively.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.20 | 0.17 |
| Intang/GW | 0.46 | 0.55 |
| Liquidity | 2.39 | 1.58 |
| Liq. + CF | 2.66 | 1.85 |
| Debt Ratio | 2.32 | 2.43 |
| Leverage | 1.77 | 1.71 |
| D/E Ratio | 0.76 | 0.70 |
The Total Return per year is shown below for years of 5 to 33 to the end of 2022 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. |
|---|---|---|---|---|---|
| 2017 | 5 | 8.13% | 2.17% | -0.76% | 2.94% |
| 2012 | 10 | 10.09% | 9.96% | 6.60% | 3.36% |
| 2007 | 15 | 11.95% | 5.33% | 2.95% | 2.38% |
| 2002 | 20 | 12.68% | 4.61% | 2.70% | 1.91% |
| 1997 | 25 | 13.69% | 6.33% | 4.48% | 1.85% |
| 1992 | 30 | 15.62% | 12.69% | 9.91% | 2.78% |
| 1989 | 33 | 15.64% | 16.41% | 12.71% | 3.70% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 27.00, 32.34, and 36.24. The corresponding 10 year ratios are 26.51, 29.06 and 33.57. The corresponding historical ratios are 23.45, 27.28 and 32.00. The current P/E Ratio is 22.03 based on a stock price of $74.90 and EPS estimate for 2024 of $3.40. The current ratio is below the low ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is done in US$ on this US stock.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 17.41, 21.16 and 24.35. The corresponding 10 year ratios are 15.95, 17.79 and 19.71. The current P/AEPS Ratio is 14.63 based on a stock price of $74.90 and AEPS estimate for 2024 of $5.12. This stock price testing suggests that the stock price is relatively cheap. This testing is done in US$ on this US stock.
I get a Graham Price of $55.03. The 10-year low, median, and high median Price/Graham Price Ratios are 1.51, 1.74 and 1.95. The current P/GP Ratio is 1.36 based on a stock price of $74.90. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap. This testing is done in US$ on this US stock.
I get a 10-year median Price/Book Value per Share Ratio of 2.38. The current P/B Ratio is 1.89 based on a Book Value of $52,673M, Book Value per Share of $39.58 and a stock price of $74.90. The current ratio is 20.5% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is done in US$ on this US stock.
I also have a Book Value per Share estimate for 2024 of $39.20. This implies a P/B Ratio of 1.91 with a Book Value of $52,165M with a stock price of $74.90. This ratio is 19.7% below the 10 year median ratio of $2.38. This stock price testing suggests that the stock price is relatively reasonable and below the median. This testing is done in US$ on this US stock.
I get a 10-year median Price/Cash Flow per Share Ratio of 19.68. The current P/CF Ratio is 13.26 based on Cash Flow per Share estimate for 2024 of $5.65, Cash Flow of $7,519M and a stock price of $74.90. This ratio is 33% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is done in US$ on this US stock.
I get an historical median dividend yield of 0.96%. The current dividend yield is 3.68% based on dividends of $2.76 and a stock price of $74.90. The current dividend yield is 284% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap. This testing is done in US$ on this US stock.
I get an historical median dividend yield of 2.11%. The current dividend yield is 3.68% based on dividends of $2.76 and a stock price of $74.90. The current dividend yield is 75% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap. This testing is done in US$ on this US stock.
The 10-year median Price/Sales (Revenue) Ratio is 3.91. The current P/S Ratio is 3.10 based on Revenue estimate for 2024 of $32,176M, Revenue per Share of $24.18 and a stock price of $74.90. The current ratio is 21% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is done in US$ on this US stock.
Results of stock price testing is that the stock price is probably relatively cheap. The dividend yield tests are saying the stock price is relatively cheap. This is confirmed by the P/S Ratio test. Basically, all the tests are saying the stock price is relatively cheap.
When I look at analysts’ recommendations, I find Strong Buy (11), Buy (6), Hold (13) and Sell (2). It would seem that analysts are quite divided on what to do about investing in this company.
This stock on Stock Chase has mixed reviews. Stock Chase gives this stock 4 stars out of 5. It is on the Dividend Aristocrats list for the S&P 500 index. David Jagielski on Motley Fool reviews this stock. Jim Halley on Motley Fool about what you should know about this stock. The company put out a Press Release on their year-end result. The company put out a Press Release on their first quarterly result..
Simply Wall Street via Yahoo Finance reviews this stock and finds it undervalued. Simply Wall Street has two warnings of dividend of 3.62% is not well covered by earnings; and profit margins (11.5%) are lower than last year (16.7%). Simply Wall Street gives this stock 3 and one half stars out of 5.
Medtronic, Inc currently generates revenues from four major segments - namely Cardiovascular Portfolio, Medical Surgical Portfolio, Neuroscience Portfolio and Diabetes. It offers its products to hospitals, third-party healthcare providers, clinics, institutions including governmental healthcare programs, distributors, and group purchasing organizations in Asia Pacific, Europe, the Americas, the Middle East, and Africa. Medtronic is headquartered in Dublin, Ireland. 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 Wednesday, October 11, 2023 around 5 pm. Today on my other blog I will write about End of an Era .... learn more on Tuesday, October 10, 2023 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. 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 site for an index to these blog entries and for stocks followed. 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. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
No comments:
Post a Comment