Dividend investing is practically always in style. There is nothing quite like getting paid to own shares in a company, and for those who opt to reinvest their dividends, doing so works wonders on long-term returns. Still, not every dividend stock is created equal, and some might end up disappointing investors by slashing their payouts or suspending them altogether.
Let's look at two that are unlikely to do so anytime soon: Medtronic (MDT 0.62%) and Visa (V -0.23%). Here is why these two dividend stocks are worth holding on to forever.
1. Medtronic
Being an innovator in the healthcare industry is a great way to have a long-lasting business. That describes Medtronic well. The medical device expert has been a leader in its field for decades and develops products that are essential for physicians and patients -- the company's portfolio includes devices across four main categories: neuroscience, diabetes care, medical-surgical, and cardiovascular health.
Although it has encountered some issues lately, especially with the pandemic and its aftereffects, there is much to look forward to with Medtronic. For one, the company is still innovating, as evidenced by its work in Wall Street's newest big thing: artificial intelligence (AI). Medtronic is hard at work incorporating AI into its business. In diabetes care, Medtronic finally earned clearance for its MiniMed 780G last year. It is an automatic insulin delivery system that tracks patients' blood sugar levels and delivers insulin as needed.
Although Medtronic trails other companies such as Abbott Laboratories and DexCom in this niche, the diabetes market is vast, with some 422 million patients worldwide. Medtronic's work here could meaningfully impact financial results for a long time. Elsewhere, the company is developing a robotic-assisted surgery system called the Hugo. Although not yet cleared in the U.S., it is already in use in other countries.
As Medtronic argues, less than 5% of eligible procedures are performed robotically, so there is massive white space ahead in this industry. Medtronic's innovative abilities have long allowed it to deliver solid and consistent financial results. Further, the healthcare leader has raised its dividend for 46 consecutive years. In a few years, it should join the elite rank of Dividend Kings. Medtronic currently offers a solid yield of 3.26%.
The company's excellent track record and robust underlying business should allow it to continue thriving and rewarding shareholders with payout increases for a long time.
2. Visa
Most people are familiar with Visa's brand and logo. The company stands as one of the leading payment network providers in the world. Millions worldwide use a credit card that bears Visa's name daily, and every time they do, Visa earns money.
That's a great business model that has helped Visa's financial results improve as people displace their use of cash and checks with credit cards. It's why the company's revenue, earnings, and cash flow have all grown rapidly in the past decade. Visa's dividend has, too.
Although the company isn't a Dividend King, its payouts are up by an incredible 420% in the past decade. What's next for Visa? More of what the company has accomplished so far. It is unlikely to get knocked off its pedestal since it practically runs a duopoly with its only notable direct competitor: Mastercard. Visa's network effect ensures that any company trying to challenge it will have difficulty. The network effect happens when a company's service becomes more valuable with use.
In Visa's case, the more merchants join its ecosystem, the more attractive it becomes to consumers. However, some might feel as though there are no more significant growth opportunities for Visa. After all, the company's business is ubiquitous. Credit cards and digital payment methods are all the rage these days, and there can't possibly be that much cash and check usage remaining.
But as the company has repeatedly pointed out, that's not true, especially in developing countries. Visa still sees a massive opportunity as economies, spending, and consumption grow. That's why Visa should be around, and continue to perform well, for a long time. The dividend should be safe, too, although the company's yield looks unimpressive at 0.8%. No matter, Visa appears to be in an excellent position to continue boosting its payouts for a while.
