Becton, Dickinson and Company: The Ultimate Stock For Turbulent Times

| About: Becton, Dickinson (BDX)

Becton, Dickinson and Company (NYSE:BDX), a medical technology company, develops, manufactures and sells medical devices, instrument systems, and reagents worldwide. The medical segment of BD is engaged in the business of manufacturing needles, syringes and medical trays, whereas other departments in BD engage in the fields of Biosciences and diagnostics.

In a sense, BD is the 'Gillette' of the medical world: it focuses on daily, easy-to-use disposable stuff like needles and syringes, and its consumer base, big hospitals and medical centers, is tied to its competitive supply chain. Unlike Gillette, BD operates in the 'not-very-hot' field of medical devices' supply. It is normally a grayish field with no glamor or spotlight success.

But no glamor does not mean no profits. BD has been consistently delivering handsome returns to its investors. Let's take a hard look at the numbers:

  1. Operating profit for the quarter ending on June 30th, 2011 had increased by 15% in comparison to September 30th, 2010 , to reach $471ML, while Net income from continuing operations for the same period increased by 10% to $338ML.
  2. Gross margin and operating margin of BD are an astounding 52% and 23%, respectively. That is pretty impressive even for a medical company.
  3. Return on Equity (ROE) stands at 24% and the overall Return on Investment (ROI) stands at 15%.
And what happened to the stock in the past 12 months? Pretty much nothing. It is currently trading at $73 which was where it stood 12 months ago. It is currently cheaply priced at approximately 11x next year's earnings. It is also paying a nice 2.2% dividend and is committed to a share buy- back program.
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In addition, turbulent times tend to favor BD: its stock is usually immune to big downturns in the economy due the defensive nature of the industry in which BD operates. BDX has a Beta of 0.63, which means that the stock is expected to be about 60% as volatile as the market, and this is due to the following reasons:
  1. Due to the global sales and marketing network of BD, any investor in the company ultimately receives global currency exposure rather than just sticking with the green buck.
  2. Since BD has sales in multiple continents, an investor avoids getting hit hard by a temporary slow business cycle in a specific part of the globe.
  3. BD is a dividend aristocrat having paid dividends to its investors for over 30 consecutive years. Not only that, BD has been constantly increasing its dividend payout in an annual rate of 14.5%.
I believe that BDX is both a fantastic income play and an excellent growth play. It is more than likely to successfully endure the current turbulent times that investors are experiencing.

Disclosure: I am long BDX.