Could Medtronic Stock Help You Become a Millionaire?

Medical device maker Medtronic (MDT 0.62%) offers investors a couple of ways to build wealth: through the stock's gains and through its dividend income. Over the past decade, the stock has risen by 55%, and when including the impact of its dividend, the total return is around 96%.

And if not for the disruption COVID caused in the healthcare industry, the stock likely would have been up even more by now. If you hang on to Medtronic for 20-plus years, could this realistically be an investment that can generate $1 million?

Why Medtronic could be an underrated growth stock

Medtronic has the potential to be a good growth investment because of the wide reach that its business has. The company's devices help patients with more than 70 types of health conditions. And with a presence in 150 countries, it is in an excellent position to benefit from the healthcare industry's growth in the long run.

While this isn't a company that you might expect double-digit growth from these days, it can make for a reliable, slow-growing business that achieves significant growth in the long run.

In its most recent quarter, for the period ended Oct. 27, 2023, revenue topped $8 billion and rose by more than 5% compared to the prior-year period. For the full fiscal year (which ends in April), the company is expecting an organic growth rate of around 4.8%.

Now that hospital operations are back to normal, there could be more normalcy and growth for Medtronic than there has been in recent years due to COVID. Between that and global supply chain issues, it hasn't been an easy couple of years, which is why investors haven't been all that excited about the stock -- it's down more than 21% in three years. But moving forward, there could be more reason for optimism from investors.

Will Medtronic's dividend streak continue?

For 46 consecutive years, Medtronic has increased its dividend payments. The raises have gotten smaller, with last year's bump being just $0.01, but management has nonetheless kept its streak alive, even amid some challenging macroeconomic conditions.

Its payout ratio sits around 89%, which is a bit high. And last quarter, its diluted earnings per share totaled $0.68, less than its quarterly dividend payment of $0.69.

There are some valid concerns for investors over whether the dividend might have gotten too high for the streak to continue, which means the ability for Medtronic to be a reliable dividend stock for the next couple of decades is questionable. While I wouldn't expect a cut to be imminent, investors probably shouldn't feel too comfortable in assuming the dividend will continue to grow.

Can Medtronic be a stock that gets you to $1 million?

For Medtronic to be a millionaire-making investment, you should at least expect it to be able to outperform the market. Otherwise, there would be little reason to buy it, and investors would be better off going with a diversified fund that mirrors the S&P 500 and can be safer in the long run.

Medtronic should be able to generate single-digit growth and, combined with its dividend, it could potentially get close to double digits. But I'm not confident that it can outperform the market for multiple decades. Plus, if the dividend is in danger and gets cut, the stock could end up in free fall.

If a stock were to grow at the S&P's long-run average of 10% for a period of 20 years, then an investment would increase to nearly seven times its original value. That would mean you would need to invest close to $150,000 to become a millionaire.

That's not a practical amount for most investors to put into a single stock, let alone one whose dividend might not be the safest right now, such as Medtronic. Plus, if the stock isn't outperforming the market and its growth rate is lower than the S&P's, you would need to invest even more than $150,000.

The company still has growth potential, but investors shouldn't expect this to be a stock that gets them to $1 million.

Ultimately, I don't see a strong reason for investing in Medtronic today. The stock isn't terribly expensive, trading at 16 times its estimated future profits, but its growth rate isn't terribly high, its dividend doesn't look all that safe, and there are simply safer and better growth stocks for investors to consider.