Medtronic (MDT 1.93%) is a medical device company with vast and diverse operations. Its business is fairly stable although the stock's returns haven't been all that great. However, it also provides investors with a solid dividend that currently yields 3.4%.
Recently, Medtronic released its full-year earnings numbers and made a significant announcement with respect to how its business will be structured in the future. It's a decision that could result in some terrific gains for its investors.
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Medtronic to spin off its diabetes business
On May 21, when Medtronic released its full-year results for fiscal 2025, it also announced its intent to spin off its diabetes business into a separate entity. This can allow both the new company and the remaining one to be more focused in their efforts. Medtronic's diabetes business has been growing at a fast rate and may be more suitable for growth-oriented investors, whereas the remaining business may be more appropriate for risk-averse investors who are just seeking slower growth, dividends, and greater long-term stability.
Medtronic says it could take 18 months for the spin-off to happen, at which point a public offering is likely to take place. Investors who hang on to Medtronic stock will get a piece of the new company and will also be able to invest in it directly through a stock purchase.
The new entity will be able to more directly focus on diabetes care. In the press release, Medtronic said that the spun-off entity will be "uniquely positioned as the only company to commercialize a complete intensive insulin management ecosystem." There are over 8,000 people in Medtronic's diabetes business all over the world. The segment accounts for 8% of the company's revenue and 4% of its operating profits.
A more growth-focused business to invest in
There are significant long-term opportunities in diabetes care, which the new company can focus on. For investors who may not want to invest in the entire Medtronic business but instead simply want to invest in its diabetes business, this spin-off will give them that opportunity.
In its full-year results for fiscal 2025, which ended on April 25, its diabetes segment generated $2.8 billion in revenue and rose by nearly 11% year over year. That rises to almost 12% when factoring out foreign exchange. The segment is the smallest one in Medtronic's overall operations, but it's also the fastest-growing one. After diabetes, the company's fastest-growing segment was its cardiovascular business, which experienced top-line growth of around 6%.
Its diabetes business centers around its MiniMoed 780G system, which is an automated insulin delivery system. It can help track and automatically correct glucose levels every five minutes, and that can be a game changer for people living with diabetes.
NYSE: MDT
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Should you buy Medtronic stock now or wait?
Medtronic's stock has been an underwhelming investment to hold on to in recent years. While it's up around 4% this year, over a five-year period its returns are negative -- down 15%. The company's lackluster growth over the years hasn't inspired a lot of bullishness behind the stock.
But now, with Medtronic spinning off its diabetes business, there will be a better growth option available to investors. If you still want all of Medtronic's healthcare businesses in your portfolio, then you might want to buy the stock now rather than wait, especially since it's trading at a relatively modest 15 times next year's earnings (based on analyst estimates).
However, if you just want to invest in its diabetes business, then you may want to wait until the spin-off is finished and the diabetes business is trading under its own ticker symbol.
