Stryker Corporation (SYK) vs. Medtronic, Inc. (MDT): Which Stock’s the Better Buy?

Still, Medtronic’s smaller divisions, such as its endovascular and neuromodulation units, have shown strong growth and optimism for the future. Is that enough for Medtronic, Inc. (NYSE:MDT) to beat out Stryker Corporation (NYSE:SYK), however?

Battle for the buy
One look at the basics gives Medtronic the early edge. The company’s superior dividend — at a payout ratio only marginally higher than Stryker’s — will appeal to income investors, while Medtronic, Inc. (NYSE:MDT) is also considerably cheaper on a P/E basis and boasts a greater net profit margin.

Both companies have also done a good job expanding beyond U.S. borders. Medtronic boasts nearly 45% of its sales from international sources, including almost 16% of revenue from the fast-growing Asia-Pacific region. While Stryker has been more reliant on American revenue — only 35% of the company’s sales came from abroad in 2012 — its purchase of Chinese medical device firm Trauson Holdings earlier this year gives it a leg up in the second-largest economy that’s become a must-have market for health care firms.

I would love to tell you to buy both stocks, but I’ve got to pick a winner between these two top-tier medical device companies. Stryker’s the smaller company, but its orthopedics unit — even with lawsuits raining down on hip recalls across the industry — is well-positioned to capitalize on the future of obesity and aging, while its growth of other, smaller business units is diversifying sales in case of a downturn.

While Medtronic, Inc. (NYSE:MDT)’s a strong company and worth a look from any investor, I can’t shake the concerns over the CRM business, particularly given Medtronic’s significant revenue from the industry. That industry isn’t heading for greener pastures any time soon, and although Medtronic’s also developing its smaller, higher-growth businesses, CRM woes could hamper growth in the long term.

There you have it: In the battle between two top-notch health care stocks, Stryker Corporation (NYSE:SYK) is your winner by a hair. From long-term growth to smart moves like the Trauson purchases, Stryker is worth the investment for long-term investors everywhere.

The article Stryker vs. Medtronic: Which Stock’s the Better Buy? originally appeared on Fool.com and is written by Dan Carroll.

Fool contributor Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson and Medtronic.

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