1 Reason Every Investor Should Know About Medtronic (MDT)

Key Points

• The company has a nearly 50-year history of annual dividend raises.

• Yet, the medical device maker is not usually flagged as a dividend stock.

• 10 stocks we like better than Medtronic ›

The list of Dividend Kings -- the very few U.S.-traded stocks that have enacted dividend raises at least once annually for a minimum of 50 years in a row -- is extremely short. That's why it's quite an event when a new stock joins this very limited and exclusive club.

Barring a sudden collapse of its business, which is very unlikely, Medtronic (NYSE: MDT) is set to earn Dividend King status in the very near future.That will put it on the radar of income investors who might not realize that this is one of the better income-generating sleeper stocks on the scene.

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A history of fundamental and dividend growth

Medtronic's generous dividend started off modestly in the long-ago days of 1977, at well under $0.01 per share. Management started adding to the payout the following year and never stopped; ultimately that tiny amount ballooned to the current level of $0.71 per share.

Image source: Getty Images.

While all four of the company's current four business segments have shown sales growth lately -- ranging from under 1% to nearly 6% in the most recently reported quarter -- investors have been concerned that Medtronic isn't developing new products quickly enough. Yet the development process for devices, like that for medicines, can be halting at times.

Still, Medtronic is a crucial operator in the medical supply chain, and its fundamentals usually head north. In its most recent fiscal year, revenue ticked up by almost 4% over the previous frame to $33.5 billion, while headline net income leaped 27% skyward to almost $4.7 billion. That shook out to a meaty bottom-line margin of 14%.

An income investor's dream

So even when Medtronic isn't wowing the medical world with an ultra-innovative new device, its wares enjoy sufficient demand to keep the growth train running. Meanwhile, that dividend is quite generous for these times -- the current yield is over 3% -- and almost certain to keep rising. This stock, then, offers a fine combination of decent fundamental growth and an attractive, constant shareholder payout.

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Eric Volkman 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.