Medtronic Is on the Cusp of Becoming a Dividend King. Is the Stock a Buy for Income Investors?

Medtronic (NYSE: MDT) has raised its dividend payouts annually for 49 consecutive years. In other words, the medical device company is just one more year and one more hike away from becoming one of just a few dozen Dividend Kings -- publicly traded companies with at least 50 consecutive years of dividend growth.

However, this status alone may not necessarily indicate that it's a strong buy for income investors. Let's take a look at other factors to assess whether this dividend growth stock can produce the type of steady, solid total returns associated with such kingly status.

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Dividend Kings status is well within reach for Medtronic

If Medtronic raises its dividend again in June 2027, the company will officially attain Dividend King status. Based on the details, hitting this appears well within reach, if not a near certainty. For one, based on estimated earnings for the current fiscal year, Medtronic has a payout ratio of just 45%.

True, in March, Medtronic spun off its diabetes products business as a new public company, MiniMed Group (NASDAQ: MMED). For now, Medtronic holds around a 90% stake in MiniMed, but Medtronic CEO Geoff Martha says the company plans to eventually reduce that position to zero. However, don't assume this will severely affect Medtronic's dividend growth bandwidth once it happens.

It's still unclear whether Medtronic plans to complete the sale of that stock by the end of 2026, as it continues to include MiniMed's results in its full-year forecasts. Also note that MiniMed reported negative cash flow during the fiscal year that ended in April 2026. If Medtronic completes its divestiture of MiniMed while it remains unprofitable, it could increase Medtronic's overall cash flow, enabling a further dividend increase.

Not only that, on top of recent improving growth, forecasts call for a further growth resurgence. Finally, given that Medtronic has slowed the pace of its dividend growth in recent years, with the latest increase just 1.4%, it could easily implement another modest dividend increase next June without overextending itself, thereby clinching Dividend King status.

The takeaway for income investors

While Medtronic doesn't face any significant hurdles to becoming a Dividend King, it's unclear whether it is a strong choice for investors seeking portfolio income over price appreciation. If the company's anticipated growth resurgence pans out, it may lead to faster dividend growth in the coming years.

However, in the meantime, Medtronic may have to maintain its policy of low dividend growth to fund its main growth drivers, such as robotic surgery and cardiac products. Medtronic has also been making acquisitions, particularly of cardiac products companies, to boost growth. This, too, could limit how much Medtronic can devote to growing its quarterly cash payouts.

That said, for investors seeking both portfolio income and capital growth, it could be a solid opportunity in the coming years. For now, investors can collect a payout that yields about 3.1% at the current share price. In the years ahead, if earnings growth accelerates, shares could surge in line with earnings.

I wouldn't rule out the possibility of the market rerating the stock higher, but keep in mind that with Medtronic trading at around 15.5 times estimated earnings for the fiscal year ending April 2027, in line with other medical device stocks such as Boston Scientific and GE Healthcare, I wouldn't assume too much potential for multiple expansion.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends GE HealthCare Technologies and Medtronic. The Motley Fool has a disclosure policy.