Medtronic: The Only Medical Device Stock I'd Consider a Lifetime Hold

When it comes to medical devices, some of the most exciting ones, to me, are robotic surgical systems. Intuitive Surgical has been a leader in that arena, averaging annual gains of 19% over the past 15 years. Its shares are a bit on the steep side these days, though, and it’s not the only game in town, either.

Consider Medtronic (MDT +0.65%), which is moving into robotic surgeries while remaining a titan in the medical device world. Its valuation is more compelling, as it sports a recent forward-looking price-to-earnings (P/E) ratio of 16.3, for example, a bit below its five-year average of 16.7.

Image source: Getty Images.

Why Medtronic?

There’s a lot to like about this company. Let’s start with its dividend, which recently yielded 2.9%. Better still, it has been increasing that payout for 48 consecutive years. That’s a record it’s proud of, and you can be sure it aims to continue hiking that dividend over time. That streak also reflects a well-run business, as it’s been able to stay in business for decades while paying out dividends to shareholders annually – and increasing the payout annually, too.

Meanwhile, its payout ratio – the portion of earnings it pays out in dividend form – was recently about 79%, leaving some room for further growth and suggesting that the dividend is sustainable. Here’s a little more about Medtronic:

• It has more than 41,000 active patent matters.
• It employs more than 13,600 scientists and engineers in more than 150 countries.
• It treats more than 70 health conditions with its offerings.
• It has more than 174 active clinical trials.
• It’s spending around $2.7 billion annually on research and development.

Its treatments span surgery, endoscopy, cardiac ablation, neurovascular disorders, neuromodulation, pelvic health, gastric therapies, and cranial and spinal technologies, among others.

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NYSE: MDT

Medtronic

Today’s Change

(0.65%) $0.63

Current Price

$97.66

Key Data Points

Market Cap

$125B

Day’s Range

$96.30 - $98.06

52wk Range

$79.55 - $106.33

Volume

8.3M

Avg Vol

7.5M

Gross Margin

59.59%

Dividend Yield

2.90%

Medtronic has also had a diabetes division, offering services and therapies for insulin-dependent patients. But notably, in order to focus on faster-growing businesses, it’s spinning off this unit in early March, aiming for a valuation of close to $8 billion. (Medtronic’s market value at the time of this writing is $124 billion.)

Medtronic is growing

We all want the companies we invest in to grow, and Medtronic is growing. Its recently reported third quarter featured revenue up 8.7% year over year, and importantly, it secured FDA approval for its Hugo robotic surgery system. CEO Geoff Martha noted:

By unlocking new markets and investing in high-growth opportunities, we are accelerating performance across the company. Our innovation pipeline and portfolio breadth give us confidence in our ability to sustain long-term growth. It’s an exciting time for Medtronic.

Given all that Medtronic already does and its deep-pocketed commitment to innovation and growth, I’d be happy to own shares of this company for many years, if not a lifetime. It offers not only a good chance of solid growth but also a solid stream of income. It’s on my watchlist.