Abbott vs. Medtronic: Which Dividend-Paying MedTech Stock is Better?

Medtronic (MDT) and Abbott (ABT) are both demonstrating strong momentum in 2025, outperforming the S&P 500 year-to-date with gains of 6.5% and 18.8%, respectively. Medtronic reported 10.9% earnings growth and 5.4% revenue improvement, driven by cardiovascular, neuromodulation, and diabetes segments, and is spinning off its Diabetes unit, while Abbott achieved high single-digit sales growth and double-digit earnings growth, benefiting from a diversified business. Despite both companies having solid dividend growth, Medtronic is presented as the more compelling value due to its lower forward P/E ratio of 14.41x compared to Abbott's 24.87x and its upcoming EPS-accretive Diabetes business spin-off.

Analysis

Abbott (ABT) and Medtronic (MDT) are exhibiting robust momentum in 2025, with year-to-date share price increases of 18.8% and 6.5% respectively, significantly outperforming the S&P 500's 0.8% gain. Medtronic recently concluded its fiscal 2025 with a 10.9% increase in earnings and a 5.4% rise in year-over-year revenue, driven by strong performance in its cardiovascular, neuromodulation, and diabetes segments; notably, its Cardiac Ablation Solutions (CAS) and ENT businesses each surpassed $1 billion in annual revenues. A key strategic initiative for Medtronic is the planned spin-off of its Diabetes unit, which is structured to be accretive to earnings per share. Abbott, in its first-quarter 2025, reported high single-digit sales growth and double-digit earnings growth, fueled by innovations such as its FreeStyle Libre franchise, which saw organic growth near 20%, and growth across all four major business units. Both companies are committed to shareholder returns: Abbott increased its quarterly dividend by 7.8%, marking its 52nd consecutive year of dividend growth with a current payout ratio of 49%, while Medtronic declared its 48th consecutive annual dividend increase and returned $6.3 billion to shareholders in fiscal 2025 with a payout ratio of 52%. From a valuation perspective, Medtronic trades at a forward 12-month price-to-earnings (P/E) ratio of 14.41x, below its 5-year median of 16.19x, whereas Abbott trades at a forward P/E of 24.87x, above its 5-year median of 24.03x. This suggests Medtronic offers a more attractive valuation. Despite both companies carrying a Zacks Rank #3 (Hold), the article posits Medtronic as potentially a better buy due to its valuation and the value-unlocking potential of its Diabetes business spin-off.

Key Decisions for Investors

• Investors may find Medtronic (MDT) compelling due to its forward P/E of 14.41x, which is below its historical five-year median, and the strategically planned EPS-accretive spin-off of its Diabetes unit.
• Abbott (ABT) continues to demonstrate robust fundamentals with double-digit Q1 2025 earnings growth and a 52-year record of dividend increases, though its current forward P/E of 24.87x reflects a premium valuation that warrants consideration.
• For those focused on dividend income and growth within the MedTech sector, both companies are strong candidates, however, Medtronic currently presents a more attractive valuation and a slightly higher payout ratio (52% vs. Abbott's 49%).
• Key developments to monitor include the execution and financial impact of Medtronic's Diabetes business separation and Abbott's sustained organic growth momentum, particularly from its FreeStyle Libre franchise and diagnostics segment.