This Stock Is Knocking on the Door of the Dividend Kings -- and Wall Street Thinks It Has Room to Run

Medtronic (NYSE: MDT), one of the world's largest medical device makers, was once a reliable blue chip dividend stock. But over the past five years, its stock has declined 33%. Even after including reinvested dividends, it delivered a negative total return of 22%.

Medtronic lost its luster as it struggled with higher costs, supply chain bottlenecks, quality control issues, and a failure to keep up with Intuitive Surgical (NASDAQ: ISRG) in the surgical robotics market. The rise of GLP-1 weight loss drugs, which would presumably reduce the need for surgeries and implants, has also cast a shadow over the broader medical device industry. Moreover, the spin-off of its diabetes unit as MiniMed (NASDAQ: MMED) in March will temporarily dilute its near-term earnings and inject uncertainty into its medium-term outlook.

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But at $87 per share, Medtronic's stock trades at just 15 times forward earnings and pays an attractive forward yield of 3.4%. It raised its dividend for the 49th consecutive year in June, putting it on track to join the Dividend Kings next year if it crosses the 50-year mark.

Wall Street analysts still have a median price target of $100 per share for Medtronic, and none rate the stock a "sell" despite its disappointing performance over the past few years. So should you invest in Medtronic today in anticipation of a multi-year turnaround?

What's the bullish case for Medtronic?

In fiscal 2026 (which ended this April), Medtronic's revenue rose 8.4% to $36.4 billion (5.8% organically) and represented its strongest top-line growth in ten years. From fiscal 2026 to fiscal 2029, analysts expect its revenue and EPS to grow at CAGRs of 5% and 13%, respectively.

The growth should be driven by its newer products, including the Affera Pulsed Field Ablation (PFA) system for atrial fibrillation, the Symplicity Spyral system for treatment-resistant hypertension, and the Hugo Robotic-Assisted Surgery (RAS) system. It's also integrating more AI features into its endoscopy module and spinal surgical planning products. The expansion of that robotics and AI pipeline, along with its restructuring and streamlining efforts (as seen in its MiniMed spin-off), should boost Medtronic's free cash flow (FCF) and free up more resources for expanding its higher-margin cardiovascular and neuroscience portfolios.

Medtronic's FCF rose 4.6% to $5.43 billion in fiscal 2026. It spent only $3.64 billion of that total on dividends, leaving it plenty of room for future hikes. Its yield is still below the 10-year Treasury's 4.6%, but that balance could shift once interest rates decline again. If it becomes a Dividend King next year, it could attract even more attention from income investors. It also bought back nearly 5% of its shares over the past five years.

Medtronic still looks cheap compared to the S&P 500, which trades at 29 times earnings, and higher-growth competitors like Intuitive Surgical, which trades at 32 times forward earnings. Therefore, Medtronic merely needs to clear Wall Street's conservative estimates rather than generate accelerating top and bottom-line growth to stabilize its stock.

Is it the right time to buy Medtronic's stock?

Medtronic disappointed many investors over the past five years, but it could be on the cusp of a turnaround. If its catalysts start kicking in and investors rerate it as a reliable blue chip dividend stock rather than a struggling medical device maker, its stock could finally bounce back.

While Medtronic still needs to resolve its most pressing issues, brighter days seem to be ahead. Its restructuring efforts, strong cash flow generation, attractive yield, and low valuation make it a smart value stock to buy today as greedy investors chase higher-growth stocks.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intuitive Surgical and Medtronic. The Motley Fool recommends the following options: long January 2028 $520 calls on Intuitive Surgical and short January 2028 $530 calls on Intuitive Surgical. The Motley Fool has a disclosure policy.