Medtronic PLC (MDT) Dividend Stock Analysis

The medical equipment market is highly competitive and is characterized by short product life cycles. However, the scale of Medtronic’s operations, its continued investments in innovation as well as its diverse nature of procedures offset some of the risks mentioned in the previous sentence.

The annual dividend payment has increased by 16% per year over the past decade, which is higher than the growth in EPS. The expansion in the dividend payout ratio allowed the company to raise distributions at a rate that is higher than earnings.

A 16% growth in distributions translates into the dividend payment doubling almost every four and a half years. If we look at historical data, going as far back as 1978 we see that Medtronic has actually managed to double its dividend every four years on average.The dividend payout ratio increased from 16% in 2007 to 30% in 2016. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

Currently, Medtronic PLC (NYSE:MDT) is attractively valued at 15.60-times forward earnings, has an adequately covered dividend and yields 2.40%. I would consider adding to my position in the stock subject to availability of funds.

Full Disclosure: Long MDT, BAX and BDX

Additional Links:

(1) http://www.dividendgrowthinvestor.com/2016/06/medtronic-high-dividend-growth-stock.html

(2) http://www.dividendgrowthinvestor.com/2010/05/why-dividend-growth-stocks-rock.html

(3) http://www.dividendgrowthinvestor.com/2009/06/dividends-versus-share-buybacksstock.html