If you're a dividend investor, I can understand why -- because dividend-paying stocks offer a triple upside: As long as the underlying company is healthy and growing, its stock price will likely increase over time. It will deliver value to shareholders via a cash distribution, as well, in the form of dividends. And those dividends will likely increase over time, too. It's hard to beat all that.
Medical device specialist Medtronic (MDT 0.75%) has long been a solid dividend stock -- and it has upped its payout for nearly 50 years in a row. It recently sported a dividend yield of 3.2%, meaning that if you have, say, $1,000 invested in Medtronic, you can expect to collect about $32 in dividends over the year.
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That may not seem like a lot, but if you have $5,000 invested, you're looking at $160 -- and these dividend amounts grow. Over the past five years, Medtronic's payout has increased by an annual average of 5%. (Medtronic has also been buying back lots of shares in recent years, boosting its total rewards for shareholders.)
So let's say you're aiming for $1,000 annually in dividends from Medtronic. How many shares should you buy? The math isn't too complex: Medtronic's quarterly dividend is currently $0.70 per share, so $2.80 over the year. Divide $1,000 by $2.80, and you'll arrive at 357. That's the number of shares you need to own to collect that $1,000 in income. Note, too, that if the payout rises by 5% in the coming year, next year you'll be collecting $1,050 from your 357 shares, and perhaps $1,102.50 the year after.
If you're not a dividend investor, you might want to consider becoming one. Consider Medtronic, too, as its shares seem appealingly valued with a recent forward-looking price-to-earnings (P/E) ratio of 15.1, below the five-year average of 17.6.
