Here's What We Like About Becton Dickinson's (NYSE:BDX) Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Becton, Dickinson and Company (NYSE:BDX) is about to go ex-dividend in just 4 days. You will need to purchase shares before the 9th of March to receive the dividend, which will be paid on the 31st of March.

Becton Dickinson's next dividend payment will be US$0.83 per share, on the back of last year when the company paid a total of US$3.32 to shareholders. Calculating the last year's worth of payments shows that Becton Dickinson has a trailing yield of 1.4% on the current share price of $241.66. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Becton Dickinson

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Becton Dickinson paid out 60% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 30% of its free cash flow in the past year.

It's positive to see that Becton Dickinson's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Becton Dickinson, with earnings per share up 9.1% on average over the last five years. Decent historical earnings per share growth suggests Becton Dickinson has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Becton Dickinson has delivered 8.4% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Has Becton Dickinson got what it takes to maintain its dividend payments? Earnings per share growth has been modest and Becton Dickinson paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. In summary, it's hard to get excited about Becton Dickinson from a dividend perspective.

On that note, you'll want to research what risks Becton Dickinson is facing. For example, we've found 3 warning signs for Becton Dickinson that we recommend you consider before investing in the business.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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