Stock Analysis

Becton Dickinson's (NYSE:BDX) Shareholders Will Receive A Bigger Dividend Than Last Year

NYSE:BDX
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Becton, Dickinson and Company (NYSE:BDX) will increase its dividend from last year's comparable payment on the 29th of December to $0.95. This makes the dividend yield about the same as the industry average at 1.6%.

View our latest analysis for Becton Dickinson

Becton Dickinson's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Becton Dickinson's dividend made up quite a large proportion of earnings but only 52% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

The next year is set to see EPS grow by 108.4%. If the dividend continues on this path, the payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.

historic-dividend
NYSE:BDX Historic Dividend November 30th 2023

Becton Dickinson Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from $1.98 total annually to $3.80. This implies that the company grew its distributions at a yearly rate of about 6.7% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Becton Dickinson has seen EPS rising for the last five years, at 53% per annum. EPS is growing rapidly, although the company is also paying out a large portion of its profits as dividends. If earnings keep growing, the dividend may be sustainable, but generally we'd prefer to see a fast growing company reinvest in further growth.

Becton Dickinson Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Becton Dickinson you should be aware of, and 1 of them shouldn't be ignored. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.