Can Medtronic Stock Help You Become a Millionaire?

Medical device maker Medtronic (MDT -0.52%) It offers investors two ways to build wealth: stock profits and dividend income. Over the past 10 years, the stock price has risen 55%, and including the impact of dividends, the total return is approximately 96%.

And if it weren’t for the disruption caused by COVID-19 in the healthcare industry, the stock price would have been much higher by now. Could this realistically be an investment that could generate $1 million if you stick with Medtronic for 20+ years?

Why Medtronic Could Be an Underrated Growth Stock

Medtronic has the potential to be a good growth investment because of its broad scope. The company’s devices help patients with more than 70 health conditions. And with a presence in 150 countries, we are uniquely positioned to benefit from the long-term growth of the healthcare industry.

This isn’t a company you can expect to see double-digit growth these days, but you can create a stable, slow-growing business that achieves significant growth over the long term.

For the most recent quarter ended October 27, 2023, revenue exceeded $8 billion, an increase of more than 5% compared to the year-ago period. The company expects organic growth of about 4.8% for the full fiscal year, which ends in April.

Now that hospital operations are back to normal, Medtronic can return to more normal and grow than it has in recent years due to COVID-19. Between that and global supply chain issues, it hasn’t been an easy few years. That’s why investors aren’t all that excited about the stock. The stock price has fallen more than 21% in three years. But going forward, investor optimism may increase.

Will Medtronic’s dividend streak continue?

Medtronic has increased its dividend payments for 46 consecutive years. Although last year’s increase was only $0.01, the increase was reduced, but management continued to increase it despite difficult macroeconomic conditions.

The payout ratio is somewhat high at around 89%. And last quarter, diluted earnings per share totaled $0.68, which was less than the quarterly dividend payment of $0.69.

There are concerns from investors about whether dividends have become too high in successive years. This means that Medtronic’s ability to be a reliable dividend stock for decades to come is questionable. While we don’t expect a cut to be imminent, investors shouldn’t feel too comfortable assuming dividends will continue to grow.

Could Medtronic Be the Stock That Makes You $1 Million?

If you want Medtronic to be an investment that will make you a millionaire, you have to expect it to at least outperform the market. Otherwise, there is little reason to buy, and investors would be better off choosing a variety of funds that reflect their situation. S&P 500 It may be safer in the long run.

Medtronic should be able to achieve single-digit growth, and potentially closer to double digits with its dividend. But I’m not convinced it can outperform the market for decades. Moreover, if the dividend is at risk and cut, the stock could be in free fall.

If a stock grows at the S&P’s long-term average of 10% over 20 years, your investment will grow to nearly seven times its original value. That means you’ll need to invest about $150,000 to become a millionaire.

That’s not a practical amount for most investors to invest in a single stock, let alone a stock like Medtronic whose dividend may not be the safest at the moment. Moreover, if the stock does not outperform the market and its growth rate is lower than the S&P, you should invest more than $150,000.

The company still has growth potential, but investors shouldn’t expect this to become a $1 million stock.

Ultimately, there isn’t a compelling reason to invest in Medtronic right now. The stock isn’t very expensive, trading at 16 times expected future earnings, but its growth rate isn’t very high, its dividend doesn’t look very safe, and there are safer, better growth stocks that investors could consider. .