Dividend Stocks: Steady Medtronic Raises Dividend For 46th Straight Year

Health care leader Medtronic (MDT) presents a conservative option for investors seeking yield in the medical devices space.

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Founded in 1949, Medtronic is a medical device company that produces various products, including cardiac devices, surgical tools and insulin pumps.

With a current market cap of over $117 billion, Medtronic is the largest of 139 stocks in IBD’s Medical Products industry group. The established nature of Medtronic’s business has allowed the company to pay steady dividends.

In late May, the company announced another dividend hike, bringing the quarterly dividend to 69 cents a quarter. This marked the 46th year of dividend increases, a trend unlikely to stop any time soon.

Although there are stocks that pay better dividends, its annualized yield of 3.1% is solid. And conservative investors can take solace in greater stability than many other high yielding names. Company debt is rated at A by S&P Global, putting it firmly in investment grade.

Solid Earnings Results Overshadowed By Gloomy Guidance

Medtronic reported fourth-quarter earnings on May 25, which saw EPS of $1.57. It was only a 3% increase from the year-ago period, but extended a trend of improving profits. Revenue grew 5.6% to $5.6 billion, higher than analyst estimates.

Despite solid earnings, shares of Medtronic fell as the company issued a weak guidance. It forecast earnings for the fiscal year ending in April of $5.06, down from $5.20 in its previous guidance. Softer macroeconomic conditions including inflation, currency headwinds and interest rates were cited as reasons for the revision.

A gloomy outlook without any specific company weakness could be a positive for new investors, because Medtronic is setting a pretty low bar to beat.

The conservative stance — as also seen by the meek penny rise in the dividend — sets the company up well in the event of a recession. That’s especially the case because the majority of the company’s devices are irreplaceable in health care.

Shares of Medtronic are forming a flat base, trading above both the 50- and 200-day moving averages, with a 92.02 buy point, per MarketSmith pattern recognition.

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