Wednesday, July 9, 2008

Teleflex Incorporated (TFX) Dividend Analysis

Teleflex Incorporated engages in the design, manufacture, and distribution of specialty-engineered products for medical, aerospace, and commercial markets in North America, Europe, Middle East, Africa, Latin America, and Asia. It operates in three segments: Medical, Aerospace, and Commercial.

TFX is not a dividend aristocrat, but a member of the dividend champions. It has been increasing its dividends for the past 30 consecutive years. From 1998 up until 2007 this dividend growth stock has delivered an annual average total return of 6.90 % to its shareholders.
At the same time company has managed to deliver a 6.30% average annual increase in its EPS since 1998.

The ROE has declined slightly from 16% in the late 1990’s to about 11% in 2007.

Annual dividend payments have increased over the past 10 years by an average of 12.40% annually, which is twice as high as the growth in EPS. A 12% growth in dividends translates into the dividend payment doubling almost every 6 years. If we look at historical data, going as far back as 1990, TFX has indeed managed to double its dividend payments almost every six years on average.

If we invested $100,000 in TFX on December 31, 1997 we would have bought 2649 shares. In February 1998 your quarterly dividend income would have been $264.90. If you kept reinvesting the dividends though instead of spending them, your quarterly dividend income would have risen to $986.88 by November 2007. For a period of 10 years, your quarterly dividend income has increased by 220 %. If you reinvested it though, your quarterly dividend income would have increased by 273%.

The dividend payout has remained at or below 50 % for the majority of our study period with the exception of a brief spike in 2004. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

I think that TFX is attractively valued with its low price/earnings multiple of 17.50 and low DPR. TFX also boasts a yield of 2.40%, which is higher than the market yield.

Disclosure: I do not own shares of TFX
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