Last update on 2024-06-27

Medtronic (MDT) - Dividend Analysis (Final Score: 6/8)

Medtronic (MDT) - Comprehensive dividend analysis reveals a strong, stable dividend policy with consistent payouts, high growth rate, and robust earnings coverage.

Short Analysis - Dividend Score: 6

We're running Medtronic (MDT) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield represents the ratio of a company's annual dividend compared to its share price. It is crucial as it indicates the income generated from an investment in the stock.

Medtronic's dividend yield of 3.3382% is significantly higher than the industry average of 0.29%. Analyzing the past 20 years, Medtronic's yield has generally trended higher than the industry average, with notable spikes such as in 2008 (2.5907%) and 2022 (3.4354%). This trend is favorable as it suggests a robust and consistent return for shareholders. The increased yield also reflects positively on Medtronic's dividend policy, indicating financial stability and a commitment to returning value to shareholders.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate measures the annual increase in dividends paid per share to shareholders. A rate higher than 5% over 20 years indicates a company's capacity to enhance shareholder returns consistently, reflecting strong financial health and growth potential.

Medtronic's average dividend growth rate over the last 20 years is approximately 13.11%, which is significantly higher than the 5% benchmark. This trend suggests that Medtronic has consistently focused on rewarding its shareholders by increasing dividend payouts at a robust pace. Despite some years where the dividend growth rate fell below the average or was negative (e.g., 2003 with -6%, 2008 with -26.54%), the overall trend demonstrates a strong commitment to sustaining and growing dividends. Thus, Medtronic’s dividend growth rate is quite healthy, indicating investment appeal to income-focused investors.

Average annual Payout Ratio lower than 65% in the last 20 years?

The average payout ratio evaluates the portion of earnings a company returns to its shareholders as dividends. A threshold of 65% indicates adequate earnings retention for growth while still rewarding shareholders.

The average payout ratio for Medtronic (MDT) over the last 20 years stands at approximately 48.02%. This is well below the threshold of 65%, indicating that Medtronic has consistently paid out a moderate portion of its earnings as dividends while retaining enough to fuel growth and operations. Only in a few isolated years (e.g., 2016: 67.31%, 2019: 86.39%, 2021: 92.12%, and 2023: 97.31%) did the payout ratio exceed this threshold. This suggests that Medtronic has maintained a balanced approach to rewarding shareholders and sustaining its business, which is a good sign for long-term stability and growth potential.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings.

In assessing dividend stability, it's crucial to determine whether earnings can comfortably cover dividend payouts. For Medtronic (MDT), examining the EPS and DPS from 2003 to 2023 gives us insight. The coverage ratio calculated as EPS divided by DPS over these years reveals key trends. Lower coverage ratios in the earlier part of the period (e.g., 0.216 in 2003, 0.152 in 2004) indicate that dividends were less securely covered by earnings. However, higher ratios in recent years (e.g., 0.973 in 2023) suggest a stronger capacity to sustain dividends. Across two decades, the trend shows improvement from weaker coverage to more robust financial health, suggesting a positive trend in ensuring dividends are well-supported by earnings.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow

Medtronic's free cash flow (FCF) has shown significant variations over the years, with a trend towards increasing values in recent years. For instance, FCF increased from $1.697 billion in 2003 to a high of $6.021 billion in 2020. Understanding FCF is crucial as it represents the cash that the company can generate after accounting for its capital expenditures, indicative of its ability to pay dividends, reduce debt, and reinvest in the business. An increase in FCF signals the company's robust ability to support operations and growth.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years. Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades.

Analyzing the provided data for Medtronic (MDT), from 2003 to 2023, there hasn't been a drop greater than 20% in any single year. This is quite impressive and indicative of financial robustness. The dividend per share grew from $0.282 in 2003 to $2.75 in 2023, exhibiting an overall upward trend. The most notable drop appears to be between 2007 ($0.47) and 2008 ($0.814), which is misleading given the unusual dividend spike. Steady increases, even through tumultuous economic periods including the 2008 financial crisis and recent years impacted by global events, underscore Medtronic’s commitment to returning value to shareholders. Initially fluctuating, but mainly due to accelerating value, these upward adjustments suggest a strong dividend policy. These consistent payments are a strong indicator for income-seeking investors that Medtronic values shareholder returns and maintains long-term stability in its fiscal strategies.

Dividends Paid for Over 25 Years?

Considering whether a company has paid dividends consistently for over 25 years is crucial. It signals financial stability, a reliable profit history, and shareholder-friendly policies.

Medtronic (MDT) has paid dividends continuously for at least 25 years, increasing from $0.12 per share in 1998 to $2.75 per share in 2023. This consistent track record exemplifies the company's financial stability and strong commitment to returning value to shareholders. The upward trajectory in dividend payments also illustrates sustained profit growth and robust cash flows, all of which are persuasive indicators of sound financial health. In addition, this trend aligns well with investor expectations for reliable and increasing income streams, underscoring the attractiveness of MDT as a long-term investment. Overall, this trend is highly favorable.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable repurchases indicate a company's commitment to returning value to its shareholders by reducing the number of its outstanding shares, often seen as a positive signal of financial health.

Over the past 20 years, Medtronic (MDT) has demonstrated a history of reliable stock repurchases during 17 of these years. The number of outstanding shares has decreased from 1,227.9 million in 2003 to approximately 1,329.8 million in 2023, marking an overall decline despite notable variations. The peak in shares in 2015 and subsequent stabilization around 1,340 million shares post-2015 may be attributed to significant events such as acquisitions. The steady decrease in shares indicates a consistent effort to repurchase shares, reflected in the average repurchase rate of 0.6072. This trend is generally viewed positively, as it suggests a commitment to shareholder value, though the uptick in shares post-2015 must be duly noted.