Medtronic Poised for Growth with Value-Lifting Spin-Offs

Medtronic's (MDT) stock has trailed behind Johnson & Johnson's (JNJ) in recent years, but history may be on its side for the next decade.

The two healthcare companies ran neck-and-neck until late 2021, when JNJ started to pull ahead. This was largely due to its decision to spin off its consumer healthcare business, now known as Kenvue, which provided additional capital for growth and unlocked value in its remaining businesses.

JNJ has since made several high-profile acquisitions, including the $16.6 billion purchase of Abiomed in 2022 and the $13.1 billion acquisition of Shockwave Medical this year. The company is also reportedly close to a $20 billion deal to sell its orthopedics unit, DePuy Synthes.

Medtronic, on the other hand, has announced plans to separate its diabetes business, MiniMed, which it hopes will unlock shareholder value and drive growth in its higher-margin segments. The company is also increasing its dividend yield, currently at 3.3%, compared to JNJ's 2%.