Income Investing: A Tale of Two Stocks
When it comes to generating steady income, investors often focus on dividend yield. However, a company’s underlying business is far more crucial to consider. A high yield may look attractive, but it can be unsustainable. Instead, opt for stocks with lower yields but robust operations.
A Healthcare Leader with a Proven Track Record
Medtronic (NYSE: MDT) is a prominent medical device company that develops and markets dozens of devices across four main therapeutic areas. With a large geographical footprint spanning 150 countries, Medtronic generates steady revenue and earnings. Although its top-line growth hasn’t been impressive in recent years, there are reasons to be optimistic.
Growth Opportunities Abound
Medtronic’s diabetes care unit is gaining prominence and has plenty of room to grow. The company develops innovative insulin pumps and pens, continuous glucose monitoring devices, and more. With half a billion adults worldwide living with diabetes, Medtronic has a vast whitespace to explore. Additionally, its robotic-assisted surgery (RAS) device, the Hugo system, is being tested in the U.S. and has already been adopted in several other countries. The RAS market has significant growth potential, driven by the benefits of minimally invasive surgeries.
A Reliable Dividend Payer
Medtronic has a streak of 47 consecutive years of payout increases and is likely to become a Dividend King within a few years. Its forward yield currently sits at 3.20%, with a manageable cash payout ratio of 70.5%. While Medtronic might not be the most exciting stock, it offers stability and consistently growing income to any portfolio.
A Risky REIT to Avoid
Medical Properties Trust (NYSE: MPW) is a healthcare-focused real estate investment trust (REIT) that has faced significant headwinds. After one of its largest tenants stopped paying rent, the company’s financial performance suffered, leading to two dividend cuts in less than a year. Although Medical Properties Trust is working to fix the issue, the risk remains high. Its forward yield of 7.82% might look attractive, but it’s best to avoid the stock for now.
A Safer Income Option
Before investing in Medtronic, consider the top 10 stocks recommended by The Motley Fool’s Stock Advisor analyst team. These stocks have the potential to produce monster returns in the coming years. With a total average return of 937%, Stock Advisor has consistently outperformed the S&P 500. Don’t miss out on the latest top 10 list.
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