We recently published a list of 15 Best Dividend Stocks To Buy and Hold. In this article, we are going to take a look at where Medtronic plc (NYSE:MDT) stands against other best dividend stocks to buy and hold.
In recent years, many investors have shifted their focus from dividend-paying stocks to high-growth secular-themed stocks that typically don’t offer dividends. However, history shows that investors shouldn’t overlook dividends. According to estimates by AGF Investments, the long-term case for dividend-paying equities is strong: if a dollar was invested in the broader market Index in 1927 without reinvesting dividends, it would be worth $243 today. In contrast, that same dollar with dividends reinvested would be worth $3,737.
Because of this earnings and income potential, income investors often turn to dividend stocks when the market shifts. While these stocks may not be keeping pace with the broader market, analysts remain optimistic about their future prospects. A report from J.P. Morgan indicated that global equities are approaching a notable period of dividend growth, not just due to a cyclical rise in payouts but also because of a long-term increase in dividend momentum. Over the past 20 years, global dividends per share have grown at an annual rate of 5.6%, but analysts predict this growth will accelerate to 7.6%. The main factor driving this increased growth is the low starting point of payout ratios (dividends as a proportion of earnings). During the Covid pandemic in 2020, many companies cut their dividends, leading to a 12% drop in global dividends, which was a steeper decline than during the Global Financial Crisis. This was a rational response to an uncertain environment with unpredictable effects and duration.
READ ALSO: 10 Most Promising Dividend Stocks According to Hedge Funds
However, equity markets rebounded strongly as global earnings soared, primarily driven by Big Tech and, more recently, AI. Since dividends are typically determined by conservative boards and management, they tend to lag behind earnings during significant earnings surges. As a result, dividend payout ratios are now near their lowest levels in 25 years, meaning companies are paying out less compared to historical averages. Simply returning to a more typical payout level could contribute an additional 2% annual growth over the next five years. This isn’t just a theoretical scenario—global dividend growth has already started to exceed earnings growth in seven of the past eight quarters, as reported by J.P. Morgan.
While recent market gains have largely been driven by a small group of non-dividend-paying companies, this is starting to shift. In 2024, many big tech companies initiated their dividend policies, highlighting the importance of returning capital to shareholders and positioning dividends as a complement to share buybacks. The report highlighted that although the dividend yields from these tech giants are initially modest, the total amount they are committing to dividends is significant—$17 billion collectively over the next year. More importantly, these actions send a strong signal to the market.
Income-focused investors have increasingly turned their attention to dividend income, making it a more prominent part of personal earnings. A report by S&P Dow Jones Indices reveals that dividend income has risen from 2.68% in Q4 1980 to 7.88% in Q2 2024, demonstrating its growing importance as an income source. The report further highlighted that since 1936, dividends have accounted for over a third of total equity returns, with the rest coming from capital gains.
Our Methodology
For this list, we scanned through various credible sources, including Business Insider, Forbes, Morningstar, and Barron’s, and identified their consensus picks from their recent articles. Next, we sorted these companies based on the number of hedge funds in Insider Monkey’s database that owned stakes in these companies, as of Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A surgeon in a modern operating room holding advanced medical devices with a sense of purpose and accuracy.
Medtronic plc (NYSE:MDT)
Number of Hedge Fund Holders: 60
Medtronic plc (NYSE:MDT) is a multinational medical device company that has a diversified business, offering a wide range of devices across four key sectors: medical-surgical, neuroscience, cardiovascular, and diabetes. The company reported strong earnings for fiscal Q1 2025, with revenue of $8.4 billion, reflecting a 5.3% increase compared to the same quarter last year. Diabetes-related revenue for the period reached $686 million, showing a 12.4% year-over-year growth. This increase was largely driven by a substantial rise in international revenue, fueled by greater adoption of continuous glucose monitoring (CGM) devices and the continued rollout of the Simplera Sync sensor.
Since the start of 2025, Medtronic plc (NYSE:MDT) has surged by over 13%. Earlier this year, the company received US approval for its Simplera continuous glucose monitoring (CGM) system. In addition, it entered into a partnership with Abbott Laboratories, a prominent player in the CGM market. Under this collaboration, Abbott will supply a CGM system that is compatible with Medtronic’s devices, which Medtronic will exclusively distribute. This partnership underscores the company’s commitment to innovation and enhancing its diabetes division.
Matrix Asset Advisors made the following comment about MDT in its Q3 2024 investor letter:
“In Q3, we added to two Healthcare positions, Medtronic plc (NYSE:MDT) and Becton Dickinson (BD). Both companies are very attractive in our valuation analysis. We started the LCV position in MDT in the second quarter and added to it as more cash became available. The company’s business results have improved this year as the number of medical procedures normalized from their decline during the pandemic.”
Medtronic plc (NYSE:MDT) is a reliable investment option because of its strong cash generation. In the first half of its fiscal year, the company generated nearly $2 billion in operating cash flow, up from $1.5 billion in the same period last year. Free cash flow also increased, reaching $1.02 billion, compared to $721 million the previous year. This robust financial performance has allowed Medtronic to raise its dividend for 47 consecutive years, which makes it one of the best dividend stocks on our list. The company offers a quarterly dividend of $0.70 per share and has a dividend yield of 3.08%, as of February 4.
The number of hedge funds tracked by Insider Monkey owning stakes in Medtronic plc (NYSE:MDT) grew to 60 in Q3 2024, from 52 in the previous quarter. These stakes are collectively valued at over $4.2 billion.
Overall, MDT ranks 6th on our list of best dividend stocks to buy and hold. While we acknowledge the potential for MDT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MDT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
