Medtronic: The Only Medical Device Stock I'd Consider a Lifetime Hold

When it comes to medical devices, some of the most exciting ones, to me, are robotic surgical systems. Intuitive Surgical has been a leader in that arena, averaging annual gains of 19% over the past 15 years. Its shares are a bit on the steep side these days, though, and it's not the only game in town, either.

Consider Medtronic (NYSE: MDT), which is moving into robotic surgeries while remaining a titan in the medical device world. Its valuation is more compelling, as it sports a recent forward-looking price-to-earnings (P/E) ratio of 16.3, for example, a bit below its five-year average of 16.7.

Image source: Getty Images.

Why Medtronic?

There's a lot to like about this company. Let's start with its dividend, which recently yielded 2.9%. Better still, it has been increasing that payout for 48 consecutive years. That's a record it's proud of, and you can be sure it aims to continue hiking that dividend over time. That streak also reflects a well-run business, as it's been able to stay in business for decades while paying out dividends to shareholders annually -- and increasing the payout annually, too.

Meanwhile, its payout ratio -- the portion of earnings it pays out in dividend form -- was recently about 79%, leaving some room for further growth and suggesting that the dividend is sustainable. Here's a little more about Medtronic:

• It has more than 41,000 active patent matters.
• It employs more than 13,600 scientists and engineers in more than 150 countries.
• It treats more than 70 health conditions with its offerings.
• It has more than 174 active clinical trials.
• It's spending around $2.7 billion annually on research and development.

Its treatments span surgery, endoscopy, cardiac ablation, neurovascular disorders, neuromodulation, pelvic health, gastric therapies, and cranial and spinal technologies, among others.

Medtronic has also had a diabetes division, offering services and therapies for insulin-dependent patients. But notably, in order to focus on faster-growing businesses, it's spinning off this unit in early March, aiming for a valuation of close to $8 billion. (Medtronic's market value at the time of this writing is $124 billion.)

Medtronic is growing

We all want the companies we invest in to grow, and Medtronic is growing. Its recently reported third quarter featured revenue up 8.7% year over year, and importantly, it secured FDA approval for its Hugo robotic surgery system. CEO Geoff Martha noted:

By unlocking new markets and investing in high-growth opportunities, we are accelerating performance across the company. Our innovation pipeline and portfolio breadth give us confidence in our ability to sustain long-term growth. It's an exciting time for Medtronic.

Given all that Medtronic already does and its deep-pocketed commitment to innovation and growth, I'd be happy to own shares of this company for many years, if not a lifetime. It offers not only a good chance of solid growth but also a solid stream of income. It's on my watchlist.

Selena Maranjian has positions in Intuitive Surgical. The Motley Fool has positions in and recommends Intuitive Surgical. The Motley Fool recommends Medtronic and 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.