If you're looking for reliable dividend stocks, they don't get much better than Medtronic (MDT 2.27%). The medical device company has raised its dividend payout for 46 consecutive years.
From 1978 through the present, Medtronic's dividend payout has risen at an average rate of 16% annually. That's fast enough to double the yield you receive on your original investment every four and a half years.
NYSE: MDT
Key Data Points
While Medtronic has a history of rapid dividend raises, it's slowed down by a lot recently. This year, Medtronic increased its dividend payout by just $0.01 or 1.5%, and investors are concerned that future raises won't keep pace with inflation.
With over $31 billion in annual revenue, investors probably shouldn't expect growth at a double-digit pace in the years ahead. That said, there are advantages that come with being the world's largest medical device company that could help Medtronic grow steadily and raise its dividend payout for many years to come. Here's a closer look at this medical technology giant to see if it deserves a place in your portfolio.
Recent performance
On Nov. 21, Medtronic reported results from its fiscal second quarter that ended on Oct. 27. The business performed a little better than Wall Street was expecting on the top and bottom lines. Total revenue rose 5.3% year over year, and adjusted earnings fell 3.8% to $1.25 per share.
While a slight earnings contraction isn't what investors wanted to see, the company expects modest growth in the near term. It raised annual revenue growth guidance for fiscal 2024 to 4.75% from the 4.5% figure it announced a few months earlier. On the bottom line, management raised the expectations for adjusted earnings by $0.04 to a range between $5.13 and $5.19 per share.
Image source: Getty Images.
Reasons to buy Medtronic stock now
In October, Medtronic received approval from the U.S. Food and Drug Administration (FDA) to market the Aurora EV-ICD, a new implantable cardioverter defibrillator (ICD). Its leads remain outside the heart, so surgeons using this new pacemaker can avoid lots of dangerous complications that can come from pushing traditional ICD leads through patients' veins and into their hearts.
It's early days for the new Aurora EV-ICD, but Medtronic thinks its safety advantage can drive more than $1 billion in annual sales -- and it isn't the only new growth driver emerging from the company's development pipeline.
Medtronic is making strides with a pulsed-field ablation (PFA) device that uses electric pulses to scar heart tissue and prevent the transmission of electrical signals responsible for irregular heartbeats. This is a huge improvement over heated ablation, so a successful launch could lead to billions in annual sales. The FDA has not approved any PFA devices yet, but successful results from the Pulsed AF trial that Medtronic posted this spring suggest its device could become the first.
Some investors worry about the exploding popularity of weight management treatments and the effects they could have on sales of devices used to treat diabetes and perform bariatric surgery. Medtronic expects a modest effect on the bariatric surgery market in the near term, but doesn't see drugs like Ozempic or Zepbound affecting its long-term growth outlook.
Still a buy
As the world's largest medical technology company, Medtronic already has experienced sales representatives placed in the world's busiest hospitals. This makes launching new products a lot easier for Medtronic than it is for the competition. The company's immense size also allows it to benefit from economies of scale.
At recent prices, Medtronic shares offer an above-average 3.5% dividend yield. While its recent pace of dividend raises has been disappointing, new products on the market now and more on the way could drive growth at a high single-digit percentage in the coming decade. For most income-seeking investors, buying some shares now and holding them over the long run looks like the right move.
