Medtronic (MDT) is a global leader in medical devices. The company has its global headquarters in Dublin, Ireland, but its operational headquarters in Minneapolis, Minnesota, because of a tax inversion strategy after it acquired Covidien in 2015.
According to Stock Rover*, the stock price declined approximately (-16.4%) in 2022 and (-28.2%) in the trailing 1-year. For perspective, the S&P 500 Index has been down (-17.9%) in the past twelve months.
The company has four business segments: Cardiac & Vascular Group (~36% of total revenue), Minimally Invasive Therapies Group (~29% of total revenue), Restorative Therapies Group (~27% of total revenue), and Diabetes Group (~8% of total revenue). In addition, business operating units include Cardiac Rhythm & Heart Failure; Structural Heart & Aortic; Coronary & Peripheral Vascular; Surgical Innovations; Respiratory, Gastrointestinal & Renal; Cranial & Spinal Technologies; Specialty Therapies; Neuromodulation; and Diabetes. Total revenue was $30,117 million in the fiscal year 2021 and $31,597 million in the LTM.
Medtronic is struggling with the effects of COVID-19 because of lower elective surgeries, supply chain disruptions, and inflation. In addition, the company received an FDA warning letter on December 9th, 2021, about its diabetes business. The company disclosed the letter on December 15th, and shares dropped further.
The declining stock price has caused the dividend yield to rise to the highest in a decade at 3.21%. The 5-year average is one percentage point lower at 2.23%. In addition, Medtronic is a long-time Dividend Aristocrat and Dividend Champion with 45 years of increases. Medtronic raises the dividend by around 8% each year. Also, the reasonable payout ratio of ~56% provides confidence about the dividend safety and future increases.
Source: Portfolio Insight*
The stock price declines have made Medtronic a deal. It is trading at the lowest valuation in years. The forward P/E ratio is ~15.3X, below the 5-year and 10-year ranges. The company should eventually resolve the FDA letter. It is also streamlining by spinning off the combined Patient Monitoring and Respiratory Interventions businesses.
Source: Portfolio Insight*
Disclosure: Long MDT
Disclaimer: The author is not a licensed or registered investment adviser or broker/dealer. He is not providing you with individual investment advice. Please consult with a licensed investment professional before you invest your money.