Will Intuitive Surgical Ever Pay A Dividend?

Will Intuitive Surgical Ever Pay a Dividend?

Given all of this good news about the company’s prospects and indeed its current position of strength, will it ever return cash to shareholders via dividends? Intuitive Surgical certainly has the ability to do so, which can’t always be said regarding growth stocks. It has a cash position of more than $6 billion and generates hundreds of millions of dollars of additional cash each quarter.

Intuitive Surgical, however, has been investing that cash to fund future growth, as it has since its founding 25 years ago. The company makes small acquisitions to buy technology it can scale for future growth, and it has been buying back a relatively small amount of stock, mostly to offset dilution from employee stock awards.

We believe the company will continue this practice for the foreseeable future, meaning it is very unlikely to pay a dividend soon. However, given that the company is obviously generating much more cash than it needs to invest in the business, we believe the potential is there for Intuitive Surgical to pay a dividend.

We think this is likely many years away. But once the installed da Vinci base reaches maturity, and barring a massive strategic shift, we believe the company will have much more cash than it can profitably invest, and may therefore consider paying a dividend.

Final Thoughts

Intuitive Surgical has been one of the best medical equipment stocks to own for years. The company’s growth has been enormous, and shareholders have reaped the rewards. However, income investors would have no reason to own the stock given it has never paid a dividend.

While we don’t think that will change soon, we do believe the company will reach a point where it generates more cash than it can invest in the business. The company has proven it will return cash to shareholders via share repurchases, so a dividend isn’t a big stretch from there.

With a durable competitive advantage, a very long runway for growth, and strong free cash flow generation, we believe we will see Intuitive Surgical mature in the years ahead, and potentially begin paying a dividend to shareholders.

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Disclosure: Sure Dividend is published as an information service. It includes opinions as to buying, selling and holding various stocks and other securities.

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