$Medtronic PLC(MDT)$ is a medical device stock that covers over 150 countries and sells products for over 70 different diseases. It's truly a core holding for healthcare investors. But the stock has been in a slump, with its share price falling 8% over the past five years.
Now, investors in Medtronic are faced with a choice: buy, sell, or hold?
Can MDT regain its growth?
One of the reasons this medical device stock has been languishing is its lackluster growth in recent years. Over the past five years,, Medtronic's average quarterly revenue growth has been less than 2%, which is difficult to attract growth-oriented investors.
But Medtronic's future revenue growth can still be expected to accelerate. The company is actively developing innovative new products, like its recently approved GI Genius smart endoscope system. This device uses AI technology to help detect colorectal polyps and the company estimates it could help up to 2.7 million patients each year.
With the expansion of the healthcare industry and the resolution of supply chain issues that have been plaguing Medtronic in recent years, this medical device manufacturer's growth rate is expected to improve compared to the past few years.
Consistently growing dividend
For long-term investors, another appealing is its dividend. The stock currently offers a dividend yield of 3.4%, which is more than twice the average level of 1.4% for the S&P 500 index. And the dividend has been growing steadily for decades, with a 28% increase over the past five years.
While the payout ratio is a bit high, approaching 90%, Medtronic is working hard to cut costs and improve efficiency while exiting low-profit product lines, like ventilator products, to boost the company's profitability and eventually reduce the payout ratio to a more sustainable level.
Finally, the stock's current price-to-earnings ratio (based on analysts' earnings forecasts) is 15, making it reasonably valued.
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