Medtronic (MDT -0.24%) has been a dividend stalwart for decades. The medical device maker recently raised its dividend payment, extending its growth streak to 48 straight years. That means it is two years away from joining dividend royalty as a Dividend King.
The increase pushed the healthcare company's dividend yield further above 3%, which is more than double the S&P 500's sub-1.5% dividend yield. With a growing business and a healthy financial profile, Medtronic is an excellent option for investors seeking a high-quality, high-yielding dividend stock.
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A solid year
Medtronic recently reported its fourth-quarter and full-year results for its 2025 fiscal year. The medical device maker generated more than $33.5 billion in revenue for the year, a roughly 4% increase from the prior year. Meanwhile, its adjusted earnings grew 6% to $5.49 per share. Medtronic generated $7 billion in cash from operations, up 4%, and $5.2 billion in free cash flow after capital spending, flat year over year.
The company produced plenty of cash to cover its high-yielding dividend, which cost it nearly $3.6 billion last year. It used its remaining excess free cash flow to repurchase shares, totaling $2.7 billion in net repurchases for the year. As a result of its share repurchases, Medtronic has reduced its outstanding shares to such a degree that its total dividend payment has declined over the past year, even though it continued to bump up the per-share amount. It paid out nearly $3.7 billion in dividends in fiscal 2024.
Meanwhile, Medtronic ended its fiscal year with $2.2 billion in cash and $6.7 billion of investments, a net increase of about $1 billion from the prior year. That helps back its strong A-rated credit.
The company's growing business and strong financial profile put its high-yielding dividend on a healthy foundation.
More growth ahead
Medtronic expects to continue growing in fiscal 2026. The company is guiding for about 5% organic revenue growth in the coming year. Meanwhile, it sees its earnings per share rising by around 4%, excluding the potential impacts of tariffs, though they will be in the $5.50-$5.60 per share range with those effects.
The company is taking a notable step to enhance its long-term growth profile by seeking to separate its diabetes business. Medtronic expects to complete that separation within 18 months through a series of capital market transactions. The preferred path is to complete an initial public offering of the business and subsequently split off the remaining shares. That's a similar route that fellow healthcare company Johnson & Johnson took to separate its former consumer healthcare business, Kenvue. Medtronic expects the separation will unlock shareholder value while enhancing its margins and earnings per share.
Medtronic also expects improving market conditions to lead to improvements in its base business in the coming years. "The underlying fundamentals of our business are strong, and they are getting stronger," stated CEO Geoff Martha in the fourth-quarter earnings press release. "We are now at an inflection point as we accelerate our speed of travel to higher, more profitable growth."
The company continues to invest heavily in innovation to launch new products. Its focus is on gaining more exposure to high-growth, high-market markets. This strategy aims to deliver faster earnings growth in the future. That puts the company in a strong position to continue growing its dividend.
A healthy dividend stock
Medtronic has done an exceptional job growing its dividend over the years. It's in a strong position to continue increasing its payout. Its business is growing, with an acceleration ahead. It also has a very strong financial profile, which allowed it to repurchase enough shares so that its actual dividend outlay fell even as it increased the per-share amount. These factors put its dividend in a healthy state, making Medtronic an ideal stock to buy for a sustainable and growing passive income stream.
