Stryker Corporation (SYK), together with its subsidiaries, operates as a medical technology company. The company operates in three segments: Reconstructive, MedSurg, and Neurotechnology and Spine. The company is a member of the dividend achievers index, and has been able to boost distributions for 20 years in a row.
The company’s last dividend increase was in December 2012 when the Board of Directors approved a 24.70% increase to 26.50 cents/share. The company’s peer group includes Johnson & Johnson (JNJ), Zimmer Holdings (ZMH) and Smith & Nephew (SNN).
Over the past decade this dividend growth stock has delivered an annualized total return of 6% to its shareholders.
The company has managed to deliver an 11% average increase in annual EPS since 2002. Analysts expect Stryker to earn $4.04 per share in 2012 and $4.30 per share in 2013. In comparison, the company earned $3.45/share in 2011.
The medical device sales tax that will be introduced in 2013 might reduce near term earnings. Softer hospital budgets might also be unfavorable to earnings growth. The market for US reconstructive sales is expected to recover, thus boosting Stryker’s revenues, and hopefully offsetting any softness from Europe. The company’s future growth could come from acquisitions as well as new product launches. It spends 17%/year in R&D expenses per year in an effort to maintain market share in an increasingly competitive marketplace.
The return on equity has decreased from 27% in 2002 to 18% by 2012. I generally want to see at least a stable return on equity over time.
The annual dividend payment has increased by 33.50% per year over the past decade, which is higher than the growth in EPS.
A 33% growth in distributions translates into the dividend payment doubling every two years on average. If we look at historical data, going as far back as 1993, one would notice that the company has actually managed to double distributions every three years on average.
The dividend payout ratio has increased from 6% in 2002 to 21% in 2011. 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 Stryker is attractively valued at 14.70 times earnings and has a sustainable distribution. However, given the low yield of 2%, I would consider initiating a position in the stock on dips below $43.
Full Disclosure: Long JNJ
Relevant Articles:
- Seven Dividend Hikers in the News
- My Entry Criteria for Dividend Stocks
- How to invest like a Dividend Billionaire
- Are dividend stocks in a bubble?
Popular Posts
-
Some people out there want to beat the market. As a result, many try different things, in order to achieve their goals and objectives. One o...
-
I invest in Dividend Growth Stocks. These are companies that have managed to increase dividends for many consecutive years in a row. This i...
-
I review the list of dividend increases each week, as part of my monitoring process. This exercise helps me monitor existing holdings and po...
-
Microsoft (MSFT) and Altria (MO) grew Free Cash Flow/share at roughly comparable rates between 2013 and 2024. Each company has delivered dif...
-
I review the list of dividend increases every week, as part of my monitoring process. This exercise helps me to monitor developments in exis...
-
Successful investing boils down to Patience, Persistence and Perseverance. You need the patience to wait for the right company to hit the ri...
-
I review the list of dividend increases every week, as part of my monitoring process. It's helpful as one of the things I use to review ...
-
Many investors discuss Buffett on diversification, and conclude that he ran a "concentrated portfolio" This is missing the nuance ...
-
The US Stock Market is one giant dividend growth machine. What is truly remarkable is that the record of dividend payments by US corporation...
-
Price is what you pay, value is what you get - Warren Buffett The market for stocks goes above and below intrinsic value all the time. Shar...