There are many things you can buy with $1,000, but most won't multiply your wealth over time. Investing in equity markets remains one of the best options. Buying shares of great companies and holding onto them for a while can help turn even a relatively modest initial investment into a much larger sum.
It sounds simple enough, but it's not always easy to know which stocks to pick. Medtronic (MDT 0.62%) and Alphabet (GOOG 9.96%) (GOOGL 10.22%) are two excellent options investors should consider. For those with $1,000 that's not saved for bills and emergencies, read on to find out why buying shares of these companies with that money would be a great way to spend it.
1. Medtronic
Medtronic isn't a stock that will appeal to growth-oriented investors. However, those looking for stability, predictability, and regular dividends need look no further. Thousands of physicians routinely rely on Medtronic's medical devices and equipment, and the company markets a lot of them in four major therapeutic areas: cardiovascular, neuroscience, medical surgical, and diabetes.
These aren't the kinds of products that physicians and patients can simply skip over. People prioritize their health, so Medtronic can perform relatively well throughout economic cycles. The company's top-line growth hasn't been great, but with Medtronic in the middle of spinning off one of its low-growth units, things should improve on that front. During its latest period -- the first quarter of its fiscal 2024, ended July 28 -- Medtronic reported revenue of $7.7 billion, up by 4.5% year over year.
The company's adjusted earnings per share of $1.20 was 6% higher than the year-ago period. Medtronic has plenty of lucrative opportunities at its disposal, from the company's push to use artificial intelligence (AI) to improve its products and overall business to its robotic-assisted surgery system Hugo. And, of course, healthcare spending should increase over the long run as the world's population ages.
We will need innovative healthcare companies like Medtronic even more in the future. What about the company's dividend? Medtronic is on a streak of 46 consecutive years of payout increases. It's hard to come up with a single metric that better explains the strength of Medtronic's underlying business -- it has boosted its dividends through recessions, bull runs, pandemics, etc. Medtronic offers a dividend yield of 3.87%, an excellent number, especially when the average for the S&P 500 is just 1.62%.
The company's cash payout ratio is 82%. It looks a bit high, but Medtronic won't miss its chance to join the exclusive group of Dividend Kings (companies that have raised their payouts in at least 50 consecutive years) in a few years by failing to institute more payout raises. The dividend is safe, and so is investing $1,000 into this blue-chip company. Doing so would get investors 14 shares of the company at current levels.
2. Alphabet
Alphabet, the parent company of Google, recently reported its third-quarter results. The company's overall performance was decent, especially as it seems that the advertising market -- Alphabet's most significant source of revenue -- continues to rebound. Alphabet's total revenue for the period increased by 11% year over year to $76.7 billion. However, the stock dropped following its quarterly update because of perceived weakness within the company's cloud computing unit.
Alphabet's cloud business still makes up a small percentage of the company's top line, but given that the cloud industry has massive space to grow ahead, many investors pay especially close attention to this source of revenue. However, Alphabet's post-earnings drop may be a bit of an overreaction. At any rate, long-term investors should take the opportunity to pick up shares from the discount bin.
Here is why. First, Alphabet remains the undisputed leader in online search by a mile. The company's brand name and competitive advantage in the form of its network effect make it extremely difficult to challenge. Even an AI-powered Bing couldn't make a dent in Google's empire. Second, Alphabet's YouTube is also a leader in its streaming niche. This industry is taking entertainment over and won't stop anytime soon. Alphabet should be one of the biggest winners since YouTube benefits from the same competitive edge as Google.
Third, Alphabet is a leader in AI. Added to the company's cloud services, that grants the entire business multiple growth paths. Alphabet's shares are worth just under $123 each after the post-earnings drop, so investors can buy eight of them with $1,000. Money well spent.
