Medtronic Is on the Cusp of Becoming a Dividend King. Is the Stock a Buy for Income Investors?
Key PointsFactors such as the prospect of slow dividend growth could make Medtronic stock less attractive to income-focused investors.
Medtronic, a medical device company, has raised its dividend payouts for 49 consecutive years and is one step away from becoming a Dividend King, with at least 50 consecutive years of dividend growth. However, this doesn't guarantee it's a strong buy for income investors. To evaluate this, let's consider some factors. Medtronic missed Nvidia in 2009 when a similar signal flashed for the latter.
Now, Medtronic is just one year and one hike away from Dividend King status if it raises its dividend in June 2027. The company has a payout ratio of 45%, and spinning off its diabetes products business as MiniMed Group (NASDAQ: MMED) could increase cash flow and enable further dividend growth. Although Medtronic has slowed its dividend growth, it could still increase the payout without overextending itself.
However, Medtronic's growth resurgence could lead to faster dividend growth, but it may have to maintain low growth to fund main growth drivers like robotic surgery and cardiac products. Acquisitions could also limit how much it can devote to growing quarterly cash payouts. For income investors seeking both portfolio income and capital growth, Medtronic could be a solid opportunity, but it may not be the best choice among the 10 best stocks recommended by Stock Advisor.
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