Up to date on March twenty ninth, 2024 by Bob Ciura
Traders on the lookout for high-quality dividend progress shares ought to focus, partially, on corporations that preserve lengthy histories of dividend will increase.
Regular dividend raises from yr to yr, whatever the financial local weather, is an indication of an organization with sturdy aggressive benefits and long-term progress potential.
With that in thoughts, yearly, we evaluate every of the Dividend Aristocrats, a bunch of 68 corporations within the S&P 500 Index, with 25+ consecutive years of dividend will increase.
You’ll be able to obtain your copy of the Dividend Aristocrats checklist, together with vital metrics like dividend yields and price-to-earnings ratios, by clicking on the hyperlink beneath:
Disclaimer: Positive Dividend just isn’t affiliated with S&P International in any means. S&P International owns and maintains The Dividend Aristocrats Index. The knowledge on this article and downloadable spreadsheet relies on Positive Dividend’s personal evaluate, abstract, and evaluation of the S&P 500 Dividend Aristocrats ETF (NOBL) and different sources, and is supposed to assist particular person buyers higher perceive this ETF and the index upon which it’s primarily based. Not one of the info on this article or spreadsheet is official knowledge from S&P International. Seek the advice of S&P International for official info.
The following Dividend Aristocrat within the collection is healthcare large Medtronic (MDT).
Medtronic has a formidable historical past of dividend progress. The corporate has elevated its dividend for 46 years in a row. With an roughly 3.2% yield, Medtronic just isn’t precisely a high-yield inventory.
Nevertheless, the inventory’s yield remains to be increased than the typical yield of the S&P 500.
And, Medtronic usually raises its dividend at a excessive fee every year, due to its sturdy earnings and management place throughout the medical units {industry}.
These qualities make Medtronic a sexy dividend progress inventory for long-term buyers.
Enterprise Overview
Medtronic was based in 1949 as a medical gear restore store by Earl Bakken and his brother-in-law, Palmer Hermundslie. At the moment, Medtronic is among the largest healthcare corporations on this planet.
Medtronic PLC is the biggest producer of biomedical units and implantable applied sciences on this planet. Medtronic at present has 4 working segments: Cardiovascular, Neuroscience, Medical Surgical, and Diabetes.
In mid-February, Medtronic reported (2/20/24) monetary outcomes for the third quarter of fiscal yr 2024.
Supply: Investor Presentation
Natural income grew 5% over the prior yr’s quarter due to broad-based progress in all of the 4 segments. Earnings-per-share remained flat at $1.30 attributable to an -8% forex headwind however exceeded the analysts’ consensus by $0.04.
Due to improved enterprise momentum, Medtronic raised its steering for fiscal 2024. It expects 4.75%-5.0% natural income progress (vs. 4.75% beforehand) and earnings-per-share of $5.19-$5.21.
Progress Prospects
Medtronic is investing in progress, each organically through R&D and thru acquisitions. The primary catalyst for Medtronic is the getting older inhabitants. There are ~70 million Child Boomers within the U.S., these aged 51-69 years. Hundreds of individuals are coming into retirement day by day. Mixed with longer life expectancy and rising healthcare spending, the working atmosphere may be very engaging for Medtronic.
The corporate has had many regulatory product approvals previously yr. The brand new merchandise ought to drive progress, permitting the corporate to keep up and even achieve market share.
Supply: Investor Presentation
Medtronic additionally has a significant progress alternative in new geographic markets. Particularly, Medtronic has a presence in a number of rising markets, similar to China, India, Africa, and extra. These international locations have massive populations and excessive financial progress charges.
Medtronic’s rising market income has persistently grown at a double-digit fee for a few years. Whereas the U.S. at present accounts for simply over half of Medtronic’s income, rising markets are rising sooner.
Medtronic is buying tuck-in acquisitions and has spent greater than $3.3 billion on 9 acquisitions since 2021. These corporations embrace Acutus Medical, Medicrea, RIST, Avenu Medical, Companion Medical, Sonarmed, intersect ENT, AFFERA, and AI Biomed.
General, we anticipate Medtronic to develop its earnings-per-share by 7.0% per yr on common till 2029.
Aggressive Benefits & Recession Efficiency
The primary aggressive benefit for Medtronic is its analysis and improvement capabilities. The corporate spends closely on R&D every year, which supplies it with product innovation. Medtronic’s R&D investments over the previous few years exceed $2 billion every year.
The results of all this spending is that the corporate has an enormous mental property portfolio with almost 86,000 awarded patents. This reality has allowed Medtronic to construct a robust product pipeline throughout every of its enterprise segments.
As well as, Medtronic advantages tremendously from its world scale. The corporate operates in over 140 international locations world wide. It has the operational flexibility to generate industry-leading revenue margins, which helps gas its progress.
One other aggressive benefit for Medtronic is that it operates in a defensive {industry}. Customers usually can’t forego medical therapies, even when the economic system is in recession.
Medtronic’s earnings-per-share in the course of the Nice Recession are as follows:
2007 earnings-per-share of $2.61
2008 earnings-per-share of $2.92 (12% enhance)
2009 earnings-per-share of $3.22 (10% enhance)
2010 earnings-per-share of $3.37 (5% enhance)
Medtronic had the uncommon achievement of earnings progress every year in the course of the recession. The corporate additionally confirmed exceptional energy in the course of the pandemic. This demonstrates its recession-resistant enterprise mannequin.
Medtronic ought to be capable to proceed rising its dividend every year in each financial recessions and expansions.
Valuation & Anticipated Returns
Based mostly on the current share worth of ~$87 and anticipated earnings-per-share of $5.20 in fiscal 2024, Medtronic inventory trades for a price-to-earnings ratio of 16.7. The inventory’s present valuation is beneath that of the broader S&P 500 Index and modestly beneath its long-term common.
Within the final decade, shares of Medtronic have traded fingers at a mean price-to-earnings ratio of 17.0. We imagine that it is a truthful valuation baseline.
Because of this, Medtronic shares seem like barely undervalued at this time. If the inventory valuation expands to our truthful worth estimate by 2029, the corresponding a number of enlargement will increase shareholder returns by roughly 0.4% per yr over this era.
We anticipate 7% annual earnings progress for Medtronic by 2029, and the inventory has a 3.2% dividend yield. There’s loads of room for continued dividend will increase every year.
With a dividend payout ratio of simply over 50%, and a constructive earnings progress outlook, Medtronic ought to proceed its streak of annual dividend will increase.
Whole returns would encompass the next:
7.0% earnings progress fee
0.4% a number of enlargement
3.2% dividend yield
Medtronic is predicted to return 10.6% yearly over the following 5 years. That is a sexy potential fee of return, giving the inventory a purchase ranking.
Ultimate Ideas
Medtronic has nearly all the qualities dividend progress buyers ought to search for. It possesses a extremely worthwhile enterprise, a management place in its core markets, and long-term progress potential. It additionally has a number of catalysts for future progress and the flexibility to continue to grow its dividend even throughout recessions.
Medtronic has elevated its dividend for greater than 4 a long time, which is extremely spectacular given the continued headwinds from a troublesome macroeconomic atmosphere.
Medtronic inventory seems to offer a compelling funding alternative for long-term dividend progress buyers.
Moreover, the next Positive Dividend databases include probably the most dependable dividend growers in our funding universe:
When you’re on the lookout for shares with distinctive dividend traits, take into account the next Positive Dividend databases:
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