Medical device specialist Medtronic (MDT -1.02%) has not been the best of investments over the past five years. The stock has significantly lagged the market over this period, thanks to weak business fundamentals, including slow revenue growth. The healthcare giant now faces additional obstacles, such as the threat of steeper tariffs due to President Donald Trump's aggressive trade policies.
Even amid all that, Medtronic has plenty of redeeming qualities and could still be a solid investment for long-term investors. Here are three reasons why.
1. Medtronic is spinning off its diabetes care unit
Medtronic recently announced that it will be spinning off its diabetes care unit, which will become a stand-alone, publicly traded company. Although sales of diabetes products have been growing faster than the rest of Medtronic's business, they have also been a drag on margins. During the company's fiscal year 2025, which ended on April 25, diabetes care accounted for 8% of revenue but only 4% of operating profits. Medtronic's other segments are not growing their sales as quickly, but they have more profitable margins.
In an environment where the company may face higher manufacturing costs due to tariffs, management has chosen to focus on higher-margin opportunities. Diabetes care was also the healthcare specialist's only consumer-facing business; the others offer products to healthcare providers. The move could help Medtronic navigate the macroeconomic landscape better if Trump's tariffs remain in place. That's especially the case if the company can find other lucrative revenue growth opportunities.
Image source: Getty Images.
2. A significant opportunity in robotic-assisted surgery
Medtronic has been developing its robotic-assisted surgery (RAS) system, Hugo, for years. It has been in use in other countries, though it's yet to get the regulatory nod in the United States. The medical device specialist decided to pursue this opportunity because the RAS market is severely underpenetrated. Intuitive Surgical's da Vinci system dominates the field and faces little competition for the range of procedures for which it's approved.
Yet a couple of years ago, Medtronic pointed out that of all the procedures that could be performed robotically, fewer than 5% were. And over the long run, the demand for these kinds of surgeries will increase along with the world's aging population, since seniors are far more likely to face health issues that call for these kinds of interventions. The good news is that Medtronic's Hugo system recently completed clinical trials in the U.S. for urologic procedures. The company has requested clearance from the U.S. Food and Drug Administration for that indication.
It should be the first of many. The Hugo system could eventually become a crucial part of Medtronic's growth strategy and help improve its financial results over the long term, given the significant white space available in the industry.
3. A soon-to-be Dividend King
Despite Medtronic's recent challenges, the company has continued to pay and raise its dividends. In fact, the company has raised dividends for 48 consecutive years. Most businesses don't survive nearly five decades, let alone pay dividends for that long. Medtronic's ability to do so speaks volumes about its underlying business. It's a well-established leader in its niche of the healthcare market, with significant footprint in the industry and a long and successful history of navigating this deeply regulated sector.
All of those factors make Medtronic an excellent pick for income-seeking investors. It should continue rewarding shareholders with payout increases for a long time -- and in two years, it should become a Dividend King.
Medtronic may not be one of the most exciting artificial intelligence (AI) leaders capturing Wall Street's attention, although the company is implementing AI across its business in ways that could pay off in the long run. Regardless, its recent moves in shedding its diabetes care segment and seeking clearance for its Hugo system, along with its consistent dividend streak, make Medtronic a reliable company to invest in for the long haul.
