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3 Medical-Supply Stocks You Should Own Besides Medtronic

By Jim Halley – May 24, 2020 at 6:05AM

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MSA Safety, Fresnius Medical Care, and LeMaitre Vascular are well-priced stocks on the rise with solid dividends.

Almost all of us have heard of Medtronic (MDT -0.39%), one of the largest medical-device companies in the world with more than 90,000 employees.

On Thursday, the company announced in its fourth-quarter report that revenue and income were both down compared with the same quarter a year ago. Nonetheless, the company raised its dividend to $0.58 quarterly ($2.32 annually), marking its 43rd consecutive year of dividend increases.

A dollar bill folded into an upward-pointing arrow

IMAGE SOURCE: GETTY IMAGES.

It's never good to see revenue and net income fall, but that can easily be attributed to the COVID-19 shutdown. While the company may be benefiting somewhat because it makes ventilators -- and its respiratory, gastrointestinal, and renal segment did see a rise of 6% in revenue -- its other segments were down because people are deferring medical procedures until after the pandemic. Another thing to watch is its diabetes segment, where revenue dropped by only 1% despite fewer patient starts because demand for diabetes supplies increased. 

Stepping back, Medtronic is a well-priced stock with a trailing price-to-earnings (P/E) ratio of 27 and solid fundamentals, including income growth over each of the past six years and free cash flow that has increased over the past five years, surging to $7.2 billion this year. It's also priced well under its 52-week high of $122.15 per share, so there's plenty of upside potential. 

As long as we're looking at Medtronic, though, here are three other medical-device companies with solid growth and dividends worth investing in.

MSA Safety is coming off a strong quarter

MSA Safety (MSA -1.73%) isn't strictly a medical-supply company; it's a safety products company headquartered in Cranberry Township, Penn. However, it does sell medical safety products, including air-purifying respirators and various masks, so, unsurprisingly, it hasn't take a hit from the pandemic. 

In the first quarter, MSA Safety reported revenue of $341 million, a rise of 4.63% over the same quarter in 2019 on a reported basis. Net income climbed a healthy 87.4% to $43.8 million.

MSA also increased its dividend this year by 4%, to $1.72 annually, with a solid yield of 1.45% (the S&P 500 average is 2%). The company is considered a Dividend Aristocrat, having raised its dividend every year for more than 50 years. Workplace safety is a growth area, so even when coronavirus concerns decline, business should be good for MSA Safety. Given its price-to-earnings (P/E) ratio of 29.7, some may consider the stock to be a bit pricey, but its current price is well under its 52-week high of $142.34.

Fresenius Medical Care unaffected by pandemic

Fresenius Medical Care (FMS -1.20%), a German company, is the world's leading provider of products and services for people with chronic kidney failure, including dialysis machines, dialyzers, and related disposables.

In the first quarter, the company saw revenue of $4.93 billion -- a year-over-year increase of 8.6% -- and net income of $506 million, up 6.9% over the prior year. Other than increased costs relating to providing greater safety during the pandemic, the company's business was largely unaffected by the coronavirus in the first quarter. Its annual dividend is $0.45 per share, for a yield of 1.1%, and it has risen for the past four years.

While that dividend isn't as attractive as it could be, the stock is attractively priced, with a P/E of 18.3 and with expected earnings-per-share growth of 39.7% over the next year. It appears to be a solid buy.

LeMaitre Vascular provides a strong dividend despite headwinds

LeMaitre Vascular (LMAT 0.92%) is a Burlington, Mass.-based company that manufactures and markets devices for the treatment of peripheral vascular disease (PVD), which is the term for any blood vessel disease not affecting the heart or brain.

The company has been affected by the COVID-19 shutdown, with sales slowing beginning in March, and it reacted with layoffs and temporary pay cuts. Many vascular patients are 60 or older and have been avoiding having hospital procedures because of the pandemic.

Still, the company's sales were strong in the United States, but it faced significant revenue disruption due to COVID-19 in Europe and in Asia. The most recent quarterly report showed gross sales of $30.5 million, an increase of 7% compared to the same quarter last year, and net income of $3.17 million, a decline of 4% year over year. 

The company has raised its dividend for 10 consecutive years and is solid financially -- it has $30.6 million in cash with no debt. It just announced a quarterly dividend of $0.95 a share, an 11.8% increase over last year, with a reasonable yield of 1.5%. It's also a dividend that appears to be safe because of LeMaitre's conservative payout ratio of 28.2%.

While the company's short-range growth has slowed, with a P/E of 28.3, it remains a well-priced buy for investors willing to hold on to the stock and enjoy its dividend in the meantime.

Jim Halley has no position in any of the stocks mentioned. The Motley Fool owns shares of MSA Safety. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Medtronic plc Stock Quote
Medtronic plc
MDT
$82.27 (-0.39%) $0.32
Fresenius Medical Care AG & Co. KGaA Stock Quote
Fresenius Medical Care AG & Co. KGaA
FMS
$13.96 (-1.20%) $0.17
MSA Safety Incorporated Stock Quote
MSA Safety Incorporated
MSA
$110.56 (-1.73%) $-1.95
LeMaitre Vascular, Inc. Stock Quote
LeMaitre Vascular, Inc.
LMAT
$51.40 (0.92%) $0.47

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