The company’s last dividend increase was in November 2012 when the Board of Directors approved a 10% increase to 49.50 cents/share. The company’s peer group includes Medtronic (MDT), Baxter International (BAX) and St. Jude Medical (STJ).
Over the past decade this dividend growth stock has delivered an annualized total return of 11.70% to its shareholders.
The company has managed to deliver an 11% average increase in annual EPS since 2002. Analysts expect BDX to earn $5.63 per share in 2013 and $6.14 per share in 2014. In comparison, the company earned $5.30/share in 2012.
Despite soft economic outlook, Becton Dickinson should be able to generate higher sales in due to the sustainable demand for its diabetes products, disease testing products, and cell analysis products. The company generates almost 60% of its sales from international operations, which is expected to increase as it grows its presence in emerging markets. Becton Dickinson is also active on the acquisition front and is investing heavily in research and development, which should benefit the company through new product launches. Becton Dickinson has a solid long-term potential for its business, due to its strong position and due to the good prospects for its industry. The company enjoys strong demand for its products and a more favorable pricing than other competitors in its industry.
While the company could suffer from the implementation of a new medical device tax in 2013, it should be able to benefit from increased healthcare spending in the US and internationally.
The return on equity has increased from 20% in 2003 to 26% by 2012. I generally want to see at least a stable return on equity over time.
The annual dividend payment has increased by 15.70% per year over the past decade, which is higher than the growth in EPS.
A 16% growth in distributions translates into the dividend payment doubling every four and a half years on average. If we look at historical data, going as far back as 1975, one would notice that the company has actually managed to double distributions every six years on average.
The dividend payout ratio has increased from 19% in 2003 to 34% in 2012. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
Currently Becton Dickinson is attractively valued at 13.70 times earnings, yields 2.60% and has a sustainable distribution. I plan on initiating a position in the stock subject to availability of funds.
Full Disclosure: Long MDT