If large enough in size, passive income can be life-changing to the investor receiving it. As an income investor, it's probably not surprising that my favorite form of passive income is dividends.

This is because, when an investor selects the right dividend stocks, dividend income also tends to grow over time. The medical device stock Medtronic (MDT -2.48%) just hiked its quarterly dividend per share by 7.9% to $0.68 for the 45th consecutive year, comfortably making it a Dividend Aristocrat. But should dividend growth investors buy the stock?

A strong year for the company

In late May, Medtronic shared its earnings results for its fiscal year ended April 29. And the company didn't disappoint, delivering impressive revenue and non-GAAP (adjusted) diluted earnings per share (EPS) growth in its fiscal year 2022. 

Medtronic recorded $31.7 billion in revenue for the fiscal year, which represents a 5.2% growth rate over the year-ago period. How did the large-cap stock generate healthy growth during the year? 

Medtronic operates in the four following segments: cardiovascular, medical surgical, neuroscience, and diabetes. Admirable performance in the former three segments was more than enough to offset a revenue decline in the diabetes segment. 

The cardiovascular, medical surgical, and neuroscience segments posted 6%, 4.6%, and 7.2% year-over-year revenue growth for the fiscal year. This revenue growth was driven by Medtronic's more than 200 regulatory approvals for its medical devices during the fiscal year. 

The diabetes segment experienced a 3.1% decline in revenue over the year-ago period to $2.3 billion for the fiscal year. The lack of new product approvals caused U.S. revenue to dip 16.8% to $1 billion during the period. But this was mostly offset by double-digit revenue growth in non-U.S. developed markets and emerging markets. 

Medtronic reported $5.55 in adjusted diluted EPS for the fiscal year, which equates to a 25.6% year-over-year growth rate. There were two factors that were behind this growth in earnings. First, the company's higher revenue base and improved operating efficiency helped non-GAAP net margin to soar 380 basis points higher over the year-ago period to 23.7%. Second, share repurchases led Medtronic's diluted weighted average shares outstanding to fall 0.2% year over year to 1.4 billion during the fiscal year.

A team of surgeons performing surgery in the operating room.

Image source: Getty Images.

The safest dividend is the one just raised

It's often said that all good things must come to an end. But in the case of Medtronic's 45-year dividend growth streak, I don't believe that will be ending anytime soon for a couple of reasons.

First, analysts predict that the company's 300-plus clinical trials for its medical devices will allow its earnings to grow at a 12.7% rate annually over the next five years. And the stock's dividend payout ratio is expected to be 48.7% in fiscal year 2023, which gives Medtronic flexibility to continue growing its dividend in the years ahead. The stock's market-topping 3% dividend yield also means that investors don't have to pick between current income or future income -- they can have the best of both worlds.

A reasonably valued blue chip stock

Medtronic is a fundamentally well business. And the stock's valuation doesn't appear to fully reflect its fundamentals following a 34% decline from its 52-week high. 

This is because Medtronic's forward price-to-earnings (P/E) ratio of 14.8 is much lower than the medical devices industry average forward P/E ratio of 22. Since the stock's annual earnings growth potential of 12.7% is basically the same as the industry average of 12.8%, Medtronic arguably deserves a higher valuation multiple. These reasons are probably why billionaire Ray Dalio purchased more than $200 million of the stock for his hedge fund company Bridgewater Associates in the first quarter.