Key Points
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Medtronic faces several challenges, including slow revenue growth and uncertainty related to tariffs.
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However, the company has significant strengths, including a massive opportunity for its Hugo system.
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Medtronic’s long-term dividend streak also points to a business capable of performing well over long periods.
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10 stocks we like better than Medtronic ›
Publicly traded corporations are under no obligation to pay dividends. Among those that do, many are rather subpar in the exercise, particularly with how often they raise their payouts. That’s why companies that increase their dividends every year are highly sought after. These are often industry leaders with robust businesses, strong financial results, and the means to perform well over long periods.
Healthcare giant Medtronic (NYSE: MDT) fits that description to a T. Though some might describe the company’s business as “boring,” the medical device specialist is an excellent pick for long-term, income-seeking investors. Here’s why.
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Medtronic’s recent challenges
The past five years have been challenging for Medtronic, even beyond the business disruptions caused by the pandemic. One issue it has struggled with is slow top-line growth. The healthcare leader has been seeking ways to address this problem. Medtronic considered spinning off its lower-growth patient monitoring and respiratory interventions segments, but it eventually reversed course, combined these units, and renamed the new business “Acute Care and Monitoring.”
The medical device specialist is still seeking to streamline its operations. It recently announced that it will be spinning off its diabetes segment, which has been growing faster than the rest of its business for some time. Will Medtronic go ahead with this planned separation after backing out of its previously announced one? If it does, how will this affect its financial results?
This uncertainty may be making some investors uncomfortable. Here’s something else creating uncertainty for the company: President Donald Trump’s trade agenda. If the current administration’s tariffs stay in place, it could harm Medtronic’s expenses and its bottom line. These potential headwinds are worth monitoring, but even with them, Medtronic is an excellent pick for dividend-seeking investors.
A great buy-and-hold option
Medtronic’s decision to spin off its higher-growth diabetes segment seems odd — until we realize that, although it had a positive effect on the top line, it was dragging down margins and the bottom line. During Medtronic’s fiscal year 2025 (which ended on April 25), diabetes care represented 8% of revenue but only 4% of operating profits.
The company’s other key segments carry higher operating margins, so focusing on them will boost earnings growth, even with the minor hit to revenue growth. That’s why this separation will also help Medtronic navigate a higher-tariff environment. The company should also find other opportunities to boost its sales. Earlier this year, Medtronic announced that its robotic-assisted surgery (RAS) system, the Hugo device, performed well in clinical trials in the U.S. in urologic procedures.
The company is awaiting clearance from the U.S. Food and Drug Administration for that indication. It will mark the device’s grand commercial entrance into the U.S., and it should be the first of many approvals. In 2023, Medtronic pointed out that less than 5% of procedures that could be performed robotically currently are, so there is massive whitespace ahead. Beyond specific opportunities the company could pursue, the bigger point is that Medtronic is a well-established healthcare giant with a vast portfolio of products and a long pipeline that consistently leads to newer approvals.
The company generates consistent revenue and earnings, and it has done so for a while. Although past performance is not a guarantee of future success, Medtronic still has the qualities of a company that should deliver reasonably strong results and returns over the long run. This is thanks to its innovative abilities, deep footprints and expertise in navigating the highly regulated healthcare sector, and significant long-term tailwinds, including the world’s aging population.
All these factors make Medtronic an attractive investment, and the dividend adds yet another layer of appeal. Medtronic currently offers a forward yield of 3.3% — well above the S&P 500‘s average of 1.3% — and it has increased its payouts for 48 consecutive years. Expect Medtronic to hit the 50-year mark soon, become a Dividend King, and continue raising its dividends long after.
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool recommends Medtronic and recommends the following options: long January 2026 $75 calls on Medtronic and short January 2026 $85 calls on Medtronic. The Motley Fool has a disclosure policy.
