A detailed quantitative analysis by Medtronic Inc. (MDT) is linked here. Below are some highlights from the analysis linked above:
Company description: Medtronic Inc. is a global medical device manufacturer with leadership positions in pacemakers, defibrillators, orthopedics, diabetes management, and other medical markets.
Fair value: When calculating the fair value, I take into account the NPV MMA Differential Fair Value together with these four calculations of the fair value, a detailed description can be found on page 2 of the linked PDF:
1. Avg. High yield price
2. 20-year DCF award
3. Avg. P / E price
4. Graham number
MDT trades at a premium to all four of the above ratings. Since the material book value of MDT is not meaningful, a Graham number cannot be calculated. With the NPV-MMA differential also factored in, the stock trades at a premium of 17.7% to its calculated fair value of $ 106.16. MDT didn’t deserve any stars in this section.
Analytical data on dividends: There are three possible stars and three key metrics in this section, a detailed description can be found on page 2 of the linked PDF:
1. Free cash flow payout
2. Debt to total capital
3. Key metrics
4. Dividend Growth Rate
5th years Div. growth
6. Rolling 4-year div. > 15%
MDT has earned a star for 2.) above in this section. The stock earned a star because its recent debt to total capital was less than 45%. The company has paid a cash dividend to shareholders every year since 1977 and has increased its dividend payments for 44 consecutive years.
Dividend Income vs. MMA: Why take the equity risk and invest in a dividend stock when you could get a better return with a much lower risk money market account (MMA) or a government bond? This section compares the earning power of this stock to a High yield MMA. In this section two points are considered, a detailed description can be found on page 2 of the linked PDF:
1. NPV MMA Diff.
2. Years to> MMA
The NPV MMA Diff. that is $ 469 below the $ 500 target I’m looking for in a stock that has been raising dividends for as long as MDT has. If MDT increases its dividend by 8.0% per year, it will take 5 years to reach an MMA with an estimated 20-year average rate of 2.74%.
Peers: The company’s peer group includes: The Becton, Dickinson and Company (BDX) with a yield of 1.4% and Baxter International Inc. (BAX) with a return of 1.4%.
Conclusion: MDT received no stars in the “Fair Value” category, one star in the “Dividend Analysis Data” category, and no stars in the “Dividend Income vs. MMA” category, for a total of one star. MDT quantitatively categorizes this as a 1 star very weak Warehouse.
Using my D4L-PreScreen.xls Model, I’ve found that the stock price must drop to $ 122.35 before MDP’s NPV-MMA differential increases to the minimum of $ 500 that I’m looking for on a stock with 44 years of consecutive dividend increases. At that price, the stock would return 2.1%.
Resetting the D4L-PreScreen.xls The model and solution for the dividend growth rate required to achieve the target NPV MMA differential of $ 500, the calculated rate is 8.2%. This dividend growth rate is higher than the 8.2% used in this analysis, so it doesn’t offer a margin of safety. MDT has one Risk rating of 1.50, which classifies it as a low-risk stock.
The company has a diversified portfolio with a focus on developing products for a wide variety of chronic diseases. Despite being exposed to the highly competitive areas of the medical device markets, MDT enjoys many competitive advantages including size (operations and sales), product breadth, and financial strength. The stock trades above my calculated fair value of $ 106.16. His valuation and low yield are currently preventing me from seriously considering him in my dividend growth stock portfolio.
Disclaimer: The material presented here is for informational purposes only. The above quantitative stock analysis, including the star rating, is mechanically calculated and based on historical information. The analysis assumes that the share will develop in the future as it has in the past. This is generally never the case. Before buying or selling stocks you you should do your own research and come to your own conclusions. Please see my disclaimer for more information.
Full disclosure: At the time of this writing, I did not hold a position in MDT (0.0% of my dividend growth portfolio).
On the subject of matching items:
– Duke Energy (DUK) dividend stock analysis
– Colgate-Palmolive (CL) dividend stock analysis
– Abbvie Inc. (ABBV) dividend stock analysis
– Hasbro, Inc. (HAS) dividend stock analysis
– More stock analysis
Tags: MDP, BDX, BAX, BCR,