This Stock Has Room For Capital Appreciation And Dividend Growth

Apr.25.12 | About: Becton, Dickinson (BDX)

Becton, Dickinson and Company (NYSE:BDX) is a worldwide medical technology company with revenues of $7.87 billion. BDX sports a 2.4% forward annual dividend yield with a payout ratio of only 31%, leaving plenty of room for dividend increases. Some of the larger companies in medical instruments and supply industry are sporting very attractive multiples. BDX is no exception trading at 12.2X forward earnings. Of the medical instruments and supply companies in the United States with a market cap of $2B or more, BDX's profit margins are the second highest in the industry (15.4%). The much larger Baxter International (NYSE:BAX), is the only other company with a higher profit margin (16.2%).

Company Ticker Forward P/E Profit Margin
Thermo Fischer Scientific, Inc. (NYSE:TMO) 10.2x 8.7%
Baxter International Inc. BAX 11.0x 16.2%
PerkinElmer Inc. (NYSE:PKI) 11.5x 0.1%
Becton, Dickinson and Company BDX 12.2x 15.4%
Teleflex Incorporated (NYSE:TFX) 12.6x 8.0%
CareFusion Corporation (NYSE:CFN) 12.7x 9.6%
CR Bard Inc. (NYSE:BCR) 13.8x 11.3%
The Cooper Companies Inc. (NYSE:COO) 15.3x 13.6%
DENTSPLY International Inc. (NASDAQ:XRAY) 15.4x 9.7%
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BDX is paying under $400M a year in dividends to current shareholders. This is very safe and sustainable and is supported by $2.7B in cash on the balance sheet and over $700M in levered free cash flow. Total cash flow from operating activities has been $1.6B or better since FY ending in 2009. Its current ratio, the ratio of its current assets over current liabilities, is the second highest among the aforementioned group (3.54) behind the much smaller Teleflex Incorporated .

BDX's low payout ratio combined with a low forward earnings multiple and higher profit margins makes it a stock worth looking into for capital appreciation and dividend growth.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in BDX over the next 72 hours.