Medtronic is one of those companies you don’t need a reason for buying. You need a reason for not buying it. With a proven track record, healthy financials and a solid future catalyst, Medtronic should do very well for patient investors. But make sure you understand that this is a company you buy with a long-term perspective. With a 2.35% dividend yield, it’s not for investors primarily seeking dividend income as a passive flow of cash. Let the stock compound for a few decades, and you’ll be greatly rewarded.
Each sector has a few winning companies with either wide or narrow moat which just seem to go on and on, making shareholders richer and richer. In personal healthcare, we have Johnson and Johnson (NYSE: JNJ), in food Nestle (NYSE: NESN), in cars BMW (ETR: BMW), in pharma Pfizer Inc. (NYSE: PFE), in oil Exxon Mobil Corporation (NYSE: XOM) and in medical Medtronic PLC (NYSE: MDT). Investing in such companies will not make you rich in a hurry. They might not even make you rich within 5 years, but they all provide stable annual returns for shareholders. When you combine the dividend return and the price return, the total annual return for all of these companies are close to 8 – 12 %. That’s way better than any saving account or if you were to invest in bonds.
Also Read:Here is Why Johnson and Johnson is Buy?
Let’s dig a bit deeper into Medtronic. The company manufactures and sells device-based medical therapies to hospitals, physicians, clinicians and patients worldwide. One can device the company into the Cardiac and Vascular group, minimally invasive therapies group, restorative therapies group and diabetes group. Basically, Medtronic plays a highly important role in all of those sectors, and will probably continue doing it for decades.
As for the fundamentals and the stock performance, Medtronic is a strong buy. The current yield is 2.35% which is 17% above its 5-year average at 2.00%. Already here investors could say that the yield is big enough since it beats inflation, but there’s more. The dividend compounded annual growth rate (CAGR) is 13% last year, 12 % in the last 5 years and 16% in the last 20 years. Now that’s how you compound and play with time, not against it.
The payout ratio is very safe, being less than 40% meaning that the company should have no problems covering the dividend even if earnings started to decrease (which will happen in a financial crisis).
Medtronic (NYSE:MDT) has paid uninterrupted dividends for more than 25 years, and will most likely continue doing it for another 25 years, making Medtronic a dividend king. If we look at what the analyst from Marketwatch says then the overall recommendations from 25 analysts are 14 Buys, 1 Overweight and 9 Hold. The technical support is around $76, so now might be a time to pick up this great company a decent price.