Medtronic PLC (NYSE:MDT) Stands Out as a Strong Dividend Stock with Sustainable Payouts and Solid Profitability

Dividend investing continues to be a favored approach for those looking for consistent income, especially when market fluctuations can impact capital gains. A method to find strong dividend options includes looking for stocks with high dividend ratings while also showing good profitability and financial strength, criteria that support sustainability and lower risk. Medtronic PLC (NYSE:MDT) stands out as a strong choice under this approach, offering a mix of dependable payouts, solid profitability, and reasonable financial stability.

Key Dividend Metrics

Medtronic’s attractiveness to dividend investors is based on several important factors:

• Dividend Yield: At 3.15%, MDT’s yield is higher than both the industry average (1.89%) and the S&P 500’s 2.40%. While not the highest yield, it indicates a sustainable payout rather than one under pressure. The company ranks in the top 98% of its industry for dividend payments, highlighting its dependability.
• Dividend Growth: With a 5.10% annualized growth rate over the past five years, MDT has shown a dedication to slowly raising shareholder returns. This steady growth matches the company’s stable revenue and earnings path.
• Track Record: Medtronic has paid dividends for more than ten years without cuts, a trait shared by dividend aristocrats. This reliability is key for investors focused on income predictability.

Profitability: Supporting Sustainability

A high dividend rating isn’t sufficient on its own—profitability ensures the company can sustain and increase its payouts. Medtronic performs well here, earning a ChartMill Profitability Rating of 8/10. Key strengths include:

• Margins: An operating margin of 19.80% places it in the top 8% of the healthcare equipment sector, while a gross margin of 65.48% beats 68% of peers. These figures point to efficient operations and pricing strength.
• Returns on Capital: MDT’s return on invested capital (ROIC) of 6.74% is above its cost of capital, showing value creation. Its return on equity (9.71%) and return on assets (5.09%) also rank higher than 83% of industry competitors.

Financial Health: Areas to Watch, but No Major Concerns

Medtronic’s ChartMill Health Rating of 5/10 shows a mixed but acceptable profile:

• Debt Management: A debt-to-equity ratio of 0.53 is higher than 65% of peers, indicating moderate leverage. However, its debt-to-free-cash-flow ratio (5.50 years to repay debt) is in the top 20% of the industry, suggesting manageable debt levels.
• Liquidity: Current and quick ratios of 1.85 and 1.42, respectively, are sufficient but not leading among peers. While not a standout, liquidity isn’t a major issue given the company’s steady cash flows.

Valuation and Growth: A Fair Balance

Trading at a P/E of 16.89 (lower than 83% of industry peers) and a forward P/E of 16.57, MDT seems fairly priced. Analysts expect modest EPS growth (6.26% annually) and revenue growth (5.13%), which, while not outstanding, support ongoing dividend growth.

Why These Criteria Are Important

The screening method focuses on stocks that combine yield, growth, and sustainability. Medtronic’s strong profitability means it can afford dividends without harming operations, while its financial health, though not perfect, doesn’t indicate immediate risk. The valuation provides some protection against downside. For more details, see Medtronic’s full fundamental analysis report.

Finding More Dividend Options

Medtronic is one of many stocks that fit these standards. For investors searching for other high-quality dividend choices, the Best Dividend Stocks screener offers a selected list of candidates with strong dividend ratings, profitability, and financial health.

Disclaimer: This article is not investment advice. Investors should do their own research or consult a financial advisor before making decisions.