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Becton, Dickinson And Company: Expect More Cash To Head To Shareholders

Mar. 09, 2021 4:28 PM ETBecton, Dickinson and Company (BDX)10 Comments
Passive Income Pursuit profile picture
Passive Income Pursuit


  • Becton, Dickinson and Company is a Dividend Champion with 49 consecutive years of dividend. Shares currently yield 1.35%.
  • BDX has high recurring revenue that needs little additional capital investment to grow.
  • BDX should begin returning a larger percentage of excess cash flow to shareholders.
  • BDX is primed to ride the continued growth of the global healthcare space and could deliver 10%+ returns over time.

Becton, Dickinson and Company (NYSE:BDX) is a leader in the healthcare and medtech space. BDX is number one across a broad range of healthcare subcategories.

Image source

The substantial acquisitions over the last few years levered up BDX's balance sheet which has hampered dividend growth over that time. However, the de-levering process is nearing completion which frees up cash flow for more productive uses such as further R&D and innovation as well as faster dividend growth and a return of share repurchases.

Dividend History

The dividend growth strategy is the one that most appealed to me when I began my investment journey. The idea behind the strategy is to (1) find quality businesses that (2) pay and grow their dividend payments over time.

Becton Dickinson Dividend History

Image by author; data source Becton, Dickinson & Company Investor Relations

According to the CCC list, BDX is a Dividend Champion with 49 consecutive years of dividend growth. That's an impressive streak that dates back to 1973 and has lasted throughout all sorts of business, economic and geopolitical calamities.

During their 49 year streak, BDX has shown year over year dividend growth ranging from 2.2% to 40.0% with an average of 11.2% and a median of 10.6%.

Over that time there's been 44 rolling 5-year periods with annualized dividend growth coming in between 5.4% and 21.4% with an average of 11.3% and a median of 10.5%.

There's also been 40 rolling 10-year periods since the start of BDX's streak with annualized dividend growth ranging from 7.7% to 16.7% with an average of 11.5% and a median of 10.8%.

The 1-, 3-, 5- and 10-year period annualized dividend growth rates from BDX since 1962 can be found in the following table.

Year Annual Dividend 1 Year 3 Year 5 Year 10 Year
1962 $0.0035
1963 $0.0047

This article was written by

Passive Income Pursuit profile picture
I started a dividend growth investment strategy a few years ago and am aggressively growing my portfolio to churn out enough dividends to reach financial independence.

Analyst’s Disclosure: I am/we are long BDX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I am not a financial professional. Please consult an investment advisor and do your own due diligence prior to investing. Investing involves risks. All thoughts/ideas presented in this article are the opinions of the author and should not be taken as investment advice.

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Comments (10)

Nice write-up. Thanks.
Seems as if the dividend yield on this is currently nearer the bottom of the long term cyclical trendline than the top. On that basis alone, it would seem to be a drag on price performance assuming the risk free yield normalizes closer to the longer term trend (albeit likely a bit lower than prior peak cycle yields).
sjm- cfa profile picture
Nice article, thanks for putting it together. Most authors fail to do much (or any) financial or valuation analysis and your article put forth quite a bit on both topics. From my vantage point BDX looks moderately mispriced, which is difficult to find both in the medical device industry and in the overall market. My work suggests a FV of $272 and 3-5 year annualized return potential of ~10-12% which looks attractive to me. My biggest concern is that my portfolio is already heavily weighted to health care, with positions in ABBV, ABT, BMY, GILD, IONS, NVS, PFE & TEVA. Perhaps the market is already anticipating events that I am missing? Going to start a position in BDX. Good luck to all.
Thanks for the article. BDX is a name I've been looking to get into for a while and you convinced me to take a nibble with it being down a bit today. In the medical device field I like ABT, SYK, BDX and TMO. Which one is the most compelling buy today?
TopperBrad profile picture
I've been long BD for several years and while the div growth has been anemic, it was expected given two major acquisitions (CareFusion and Bard). Agreed, I also expect returning cash to shareholders to accelerate now that the integration of the those purchases are largely behind them.

I also expect yearly Covid booster shots to be with us globally for several years which bodes well for $BDX which is the world's largest maker of syringes/injectable devices.
rickevantodd profile picture
Exceptional article. I am a long term BDX shareholder who has been disappointed recently. Based upon your extensive analysis, and of course new assumptions need to be made, do you feel the major acquisitions were worth it?
Solid write-up.

We should expect more than 10% annually from this name.
Passive Income Pursuit profile picture

Glad you enjoyed it. I see a path to 10%+ annual returns using what I believe to be realistic and achievable assumptions which is all I can really ask for.
Passive Income Pursuit has again given us a compelling argument for buying a stock based upon its past performance. If the future will, indeed, be like the past, I see no reasonable argument against this conclusion.

But I am equally captivated by what might be called "The Tiger Woods Portfolio." A month or two ago, was there any reasonable expectation that Tiger would fail to exceed his earlier remarkable demonstrations of golfing skill?

Probably not. But who could have anticipated that his extraordinary capacity for risk-taking could have led to his present predicament?

I do not know how to reliably outperform the market, but those who succeed in doing this probably have learned how to balance the best outcome with the worst. Who knows? Maybe this balance itself is just a matter or luck.
Passive Income Pursuit profile picture
I use the rear view mirror to try and get a sense of (1) how the business has done historically, (2) where is it at now, and (3) get an idea of a possible base rate scenario. It helps me to get comfortable with the qualitative aspect of the business and also to see if current expectations deviate widely from the historic norm. That doesn't mean they can't be hit, but if a business has reliably grown revenues or cash flows at 5% annually but current expectations are for 15% annually it's a sign that the reasons for those expectations need to be scrutinized more closely.

I share your sentiment about not knowing how to reliably outperform the market. I just try to look for situations where I believe I'm getting a reasonable return on my investment capital and I'm comfortable with my perception of the quality of the business. I think that's all we can really aim for.
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