This Medical Device Giant Could Be Your Best Inflation Hedge

Key Points

• Medtronic has a vast and diversified portfolio of medical devices.

• It benefits from pricing power thanks to its patented and superior products.

• Medtronic's dividend can also help hedge against inflation.

• 10 stocks we like better than Medtronic ›

Some investors fear that President Donald Trump's aggressive tariffs will lead to economic troubles such as inflation. While things may or may not turn out that way, it's still a good idea to consider investing in companies that can help deal with the potential threat of rising prices. And Medtronic (NYSE: MDT), a medical device company, appears to be a good option in this regard. Let's consider why the healthcare giant looks attractive in the current environment.

Pricing power matters

When prices rise due to inflation, businesses must contend with increased expenses, narrower margins, and lower profits. One way to mitigate this is to pass the higher costs onto customers by increasing prices; however, since everyone is facing the same issue, consumers are also seeking ways to save money. Few corporations can raise their prices without risking the loss of a meaningful number of customers.

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Companies with substantial pricing power can do so in normal times and in an inflationary environment. Medtronic fits the bill. As a leading medical device specialist, Medtronic has a comprehensive portfolio of products spanning multiple therapeutic areas. The company routinely launches new ones, and, crucially, it holds thousands of patents -- legal monopoly rights -- that protect its products from competition and grant it some degree of pricing power.

Image source: Getty Images.

True, there are alternatives for many of the company's devices, which limits its pricing power. However, in some areas, Medtronic is a market leader and has launched products with few comparably effective competitors. In December 2023, the company received clearance in the U.S. for the PulseSelect, a device to treat heart rhythm disorders using a novel technology called pulsed field ablation (PFA), which has helped improve patient outcomes. Medtronic's PulseSelect was the first PFA system to earn the green light in the U.S.

Medtronic is no stranger to breakthroughs like this, and the company's innovations, which often help push standards of care forward, do grant it pricing power, as healthcare systems are willing to pay premiums for devices and instruments that have proven superior in clinical trials and real-world use.

Medtronic is still developing newer products. The company is expected to soon receive clearance for one that will also benefit from pricing power: the Hugo system. This robotic-assisted surgery (RAS) device is being considered for approval in the U.S. for use in urologic procedures following the successful completion of clinical studies.

There are several reasons why the Hugo system should be a significant growth driver for Medtronic. The RAS market is underpenetrated, and it's no wonder. The industry has high barriers to entry, both in terms of regulatory requirements and upfront investment. When it comes to urogolic procedures, Intuitive Surgical's da Vinci system has had little competition. Yet the minimally invasive surgeries that RAS allows physicians to perform tend to result in less skin cutting, less bleeding, and faster recoveries. So, the Hugo system will enter an underpenetrated market with few alternative products, while also helping to improve patient outcomes.

Medtronic's superb dividend record

Medtronic's innovative business leads to consistent financial results. The company's revenue and earnings tend to grow at a decent clip even when the economy isn't doing particularly well.

MDT Revenue (Annual) data by YCharts

Things were particularly challenging during the early years of the pandemic, but that was an exceptional period from which the healthcare giant recovered, providing further evidence of the company's business resilience. Here's one more reason Medtronic can be an excellent inflation hedge: It is a terrific dividend payer. Medtronic has increased its payouts for 48 consecutive years. The company is racing toward Dividend King status, a designation reserved for companies that have achieved at least 50 straight years of dividend increases.

Investors can combat inflation over the long run by reinvesting dividends, which can help boost the long-term returns of equities, allowing them to keep pace -- and hopefully even beat -- inflation. Between its outstanding dividend program, its steady and reliable business that often benefits from strong pricing power, and its innovative potential, Medtronic is a top stock for investors concerned about inflation to consider.

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Prosper Junior Bakiny has positions in Intuitive Surgical. The Motley Fool has positions in and recommends Intuitive Surgical. The Motley Fool recommends Medtronic and recommends the following options: long January 2026 $75 calls on Medtronic and short January 2026 $85 calls on Medtronic. The Motley Fool has a disclosure policy.