Becton Dickinson’s (NYSE:BDX) dividend was increased by 11%. Its overall yield is below that of the Standard & Poor's 500 Index at 1.71%. The firm has paid a dividend since January 1993.
Becton Dickinson is a New Jersey-based manufacturer and distributor of medical supplies that was founded in 1897. The firm produces a wide variety of medical supply products such as syringes, needles, diagnostic equipment, catheters and injectables. The company also provides specimen and blood collection, molecular testing, blood culturing and microorganism identification through its Life Science Division.
Becton Dickinson has maintained a solid three-year growth rate of dividends of 10%. Becton Dickinson currently ranks first in yield within the large-cap health care, medical instruments and supplies category.
The quarterly dividend for the December payment will be 73 cents versus the prior-year rate of 66 cents per share. Becton Dickinson & Co. is not a member of our Top 100 Dividend Stock List (see below).
The dividend will be paid at the new higher rate on Dec. 30 to shareholders of record at close of business on Dec. 9. Becton Dickinson is currently priced at $172.75. Listed in the table below are the quarterly dividend payments since 2010.
| Date | Quarterly Dividend |
| Dec. 9 | 73 cents |
| Sept. 7 | 66 cents |
| June 7 | 66 cents |
| March 8 | 66 cents |
| Dec. 8, 2015 | 66 cents |
| Sept. 4, 2015 | 60 cents |
| June 5, 2015 | 60 cents |
| March 6, 2015 | 60 cents |
| Dec. 8, 2014 | 60 cents |
| Sept. 5, 2014 | 54.5 cents |
| June 5, 2014 | 54.5 cents |
| March 6, 2014 | 54.5 cents |
| Dec. 6, 2013 | 54.5 cents |
| Sept. 5, 2013 | 49.5 cents |
| June 5, 2013 | 49.5 cents |
| March 6, 2013 | 49.5 cents |
| Dec. 6, 2012 | 49.5 cents |
| Sept. 5, 2012 | 45 cents |
| June 6, 2012 | 45 cents |
| March 7, 2012 | 45 cents |
| Dec. 8, 2011 | 45 cents |
| Sept. 7, 2011 | 41 cents |
| June 7, 2011 | 41 cents |
| March 8, 2011 | 41 cents |
| Dec. 8, 2010 | 41 cents |
| Sept. 7, 2010 | 37 cents |
| June 7, 2010 | 37 cents |
| March 8, 2010 | 37 cents |
Quantitative analysis
We examine Becton Dickinson upon our five key criteria, which include:
| Category | Value | Score |
| Dividend yield | 1.71% | 317 |
| Dividend growth (3- to 6-year average) | 10% | 206 |
| Forward P/E | 18.2 | 126 |
| S&P financial rating | BBB+ | 160 |
| Beta | 0.85 | 75 |
| Total Score | 884 |
Additional quantitative information on price-sales (P/S) ratio and historical yield:
| % yield | 3-year div. growth rate | 6-year div. growth rate | SPS 2016 | P/S ratio | 10-year P/S low | 10-year P/S high | 5-year lowest yield % | 5-year max yield % |
| 1.71% | 10% | 10% | 57.65 | 2.96 | 2.25 | 3.29 | 1.46% | 2.42% |
Positives
- Becton Dickinson has paid out a dividend consecutively for the last 23 years.
- Becton Dickinson maintains a beta of 0.85, lower than the average company.
Negatives
- Becton Dickinson’s dividend yield is below that of the S&P 500 Index.
- Becton Dickinson’s current dividend yield (1.71%) is below its five-year average and historical dividend yield (1.94%) and well below the max yield of 2.42%.
- Becton Dickinson is trading slightly above its 10-year average P/S average.
Latest earnings and overall analysis
Becton Dickinson issued its earnings data on Nov. 3. The company reported $2.12 earnings per share for the quarter, beating the average estimate by 3 cents. This was better than the $1.94 posted in the third quarter of last year. The medical company had revenue of $3.23 billion for the quarter, slightly higher than the consensus estimate of $3.13 billion. Revenues were up 5.6% from the year-ago quarter on a comparable currency-neutral basis. The medical division generated revenue of $2.24 billion, up 7.3% from third-quarter 2015.
Lifesciences delivered slower growth with revenues up just over 2%, at $996 million. U.S. revenues account for over half of total sales. U.S. revenue rose by nearly 7% to $1.75 billion while revenue overseas came in at $1.48 billion. This was an increase of 5% on a currency-neutral basis. For next year, the company projected overall revenue growth of 4.5% to 5.0% and earnings per share in a range of $9.62 to $9.72. This would result in double-digit earnings growth for 2017 over this year’s numbers. These numbers are also above consensus estimates of $9.44 per share.
It acquired CareFusion in March 2015. By adding CareFusion, the firm was able to expand its product suite to better sale products to hospitals. It also allows Becton to concentrate on helping hospitals to better care for their patients with fewer errors, thus reducing costs. Many of its products are also complementary such as catheters and drug pumps. As CareFusion was weak internationally, it also allows Becton to expand CareFusion’s products to additional overseas markets.
Becton Dickinson is one of the premiere companies within the medical supply industry. The firm has posted consistent earnings and dividend growth over the past decade. It also has a high R&D budget and has made smart acquisitions to expand its product line. The firm spends nearly 8% of total revenue on R&D, one of the highest levels within the industry.
In finishing up calendar year 2016, Becton outperformed expectations. Operating margins went up by 200 basis points and synergies from the CareFusion acquisition provided $120 million in cost savings. Cost savings from the deal should continue as management has guided for nearly $350 million in reduced spending by mid-2017. Overall revenue growth, which has been in the low 4% range should accelerate to close to 5% with the new product cycle and CareFusion’s excellent product line.
Priced at $172.79 per share, Becton’s stock has doubled since January 2013. Based upon expectations of $9.50 per share in earnings next year, it trades at 18.2 times projected earnings and just over 20 times trailing earnings. The stock is trading at near three times sales, toward the top end of the historical 10-year range. Its yield is below the S&P 500 although the company does provide steady 10% dividend growth each year. It is a stalwart in the industry with a low beta and investment grade credit rating. But its valuation is stretched by historical standards and a better entry price may be in the $150 to $160 range.
Although the company has strong merits, its low dividend yield, above average P/S ratio and elevated forward price-earnings (P/E) push Becton Dickinson outside our Top 100 Dividend Stocks.
Disclosure: I have no position in Becton Dickinson.
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