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Does St. Jude Medical, Inc. (STJ) Have a Rock-Solid Dividend?

Published on March 19, 2013 at 6:31 pm by The Motley Fool in News

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Future growth
Up to this point, we’ve looked at St. Jude Medical’s dividend in the past, and we’ve also seen how the market perceives its stock today. However, the most important factor to consider when understanding a dividend’s future is where the company’s cash flow is heading. It’s hard to generate more cash without growing sales, so let’s look at what industry analysts are expecting for St. Jude Medical, Inc. (NYSE:STJ)’s revenue growth relative to peers this year.

Foolish bottom line
St. Jude Medical has been dealing with a sluggish cardiac rhythm management devices market, which has seen implant volume decline across the United States. Struggles at home, combined with lower volumes driven by Europes economic struggles, have largely offset growth in Asia and other parts of the world. But while the top-line picture seems a bit uncertain in the near term, St. Jude is considered a leader in a medical-devices market benefiting from some long-term demographic shifts.

Like many of its peers, St. Jude Medical, Inc. (NYSE:STJ) spends a greater amount of free cash flow on share repurchases. In fact, last year dividends and share repurchases accounted for more than 100% of free cash flow. Not the most sustainable situation for a company dealing with revenue headwinds. However, management did just boost the dividend another 9% last month and has the flexibility to shift those capital allocation decisions toward dividends as it sees fit. St. Jude isn’t my favorite dividend stock in health care, but this is a payout you can rely on.

The article Does St. Jude Medical Have a Rock-Solid Dividend? originally appeared on Fool.com and is written by Brenton Flynn.

Brenton Flynn and The Motley Fool have no position in any of the stocks mentioned.

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NYSE:STJ St. Jude Medical Inc. (STJ)