Should one consider purchasing Medtronic's shares?
Medical titan Medtronic, symbolized by its ticker MDT and trading at a modest 2.35%, is a powerhouse in the healthcare arena. Rooted in both the United States and Ireland, this industry heavyweight delivers a wide-ranging product portfolio, encompassing hospital gear, cardiovascular care devices, and diabetes technology.
With a track record of delivering dividend increases for 47 consecutive years, Medtronic is swiftly approaching the coveted title of 'Dividend King'. Over the past half-century, this financial powerhouse has amassed a total return of nearly 60,000% thanks to those consistently increasing dividends – an incredible 600-fold increase! But despite this, its share price currently hovers more than 20% below its all-time high reached in September 2021. Is this the perfect opportunity to buy in?
Medtronic: the steady tortoise, not the hurrying hare
Approximately half of Medtronic's revenue stemmed from the hyper-profitable U.S. healthcare market in the previous year. The remaining profit originated from international sales, which presents an opportunity to tap into emerging markets that could experience substantial growth in the coming decades. For instance, the last quarter saw a 7% year-over-year surge in international sales, while U.S. revenues climbed at a slower 3.3% rate.
Medtronic derives the majority of its business from cardiovascular, neuroscience, and surgical segments, while minor revenue contributions are attributed to its diabetes division. This variety ensures a level of stability, albeit at the cost of not gaining attention for extraordinary growth. Analysts predict the company's profits will expand at a modest 6.5% annual rate for the next three to five years.
This gradually improving bottom line is enough to propel ongoing dividend growth and moderate share price appreciation however, it may not satisfy investors seeking 'get rich quick' stock picks.
Crafting the Medtronic experience
Dividend stocks, as a rule, will not yield immediate fortunes. When investing in dividend stocks, one should approach it with patience and resilience, much like the process of savoring great barbeque.
Medtronic falls short of being a 'hypergrowth' stock. Nevertheless, it is an established, dependable performer equipped with continually increasing profits and a steadfast dividend. Settle in for a gradual journey towards wealth creation, as its consistent growth can be a formidable force.
At its current share price, Medtronic offers a dividend yield of over 3%. Coupled with projected earnings growth of 6% to 7%, investors might net 9% to 10% annual returns. While not mind-blowing, Medtronic remains a solid performer that frequently outperforms the majority of stocks. The stability of its offerings also carries intrinsic value.
For maximum investment returns, don't forget to reinvest divided payments. By channeling your dividends to automatically purchase additional shares, you stimulate the potent forces of compounding, which can build substantial wealth over the long haul.
Is Medtronic a worthy investment?
Investors should resort to paying over the odds for dividend stocks. Time and patience are essential for these underlying businesses to grow sufficiently to offset an excessive valuation.
Medtronic might appear to be undervalued, given its shares trade at a price-to-earnings ratio of 15.8. Its price-to-earnings-to-growth (PEG) rate of 2.4 is marginally high, but generally, investors will buy high-quality stocks with PEG ratios between 2.0 and 2.5. Lower PEG values represent better value, as an investor receives more (expected) earnings growth for less. Blue-chip dividend stocks generally command higher valuations than their growth might initially suggest because of their reputation for reliability. Additionally, earnings projections are just educated guesses.
While Medtronic's shares may not be an outright steal at these prices, consider it an excellent business at a reasonable valuation. There is no harm in categorizing Medtronic as a shrewd investment choice, particularly for long-term investors who aim to keep the stock and reinvest the dividends.
- Given Medtronic's track record of delivering dividend increases for 47 consecutive years, investing in its stocks could be a lucrative option for those seeking stable income through dividends.
- Despite Medtronic's share price currently being more than 20% below its all-time high, the company's continued hypergrowth in international markets and steady performance in cardiovascular, neuroscience, and surgical segments make it an attractive investment opportunity.
- With a dividend yield of over 3% and projected earnings growth of 6% to 7%, Medtronic's stocks offer a promising return on investment for investors seeking moderate, consistent gains.
- Reinvesting Medtronic's dividends to purchase additional shares can take advantage of compounding, potentially building substantial wealth over the long term.
