Linked here is a PDF copy of my detailed analysis of Becton Dickinson & Co (BDX). Below are some highlights from the above linked analysis:
Company Description: Becton, Dickinson and Co provides a wide range of medical devices and diagnostic products used in hospitals, doctors’ offices, research labs, and other settings.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
- Avg. High Yield Price
- 20-Year DCF Price
- Avg. P/E Price
- Graham Number
BDX is trading at a discount to 1.), 2.) and 3.) above. If I exclude the high and low valuations and average the remaining two, BDX is trading at a 16.8% discount. BDX earned a Star in this section since it is trading at a fair value.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description:
- Rolling 4-yr Div. > 15%
- Dividend Growth Rate
- Years of Div. Growth
- 1-Yr. > 5-Yr Growth
- Payout 15% of avg.
BDX earned one Star in this section for 3.) above. BDX has paid a cash dividend to shareholders every year since 1926 and has increased its dividend payments for 35 consecutive years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
- NPV MMA Diff.
- Years to >MMA
BDX earned one Star in this section for 1.) above. The NPV MMA Diff. of the $5,316 is in excess of the $2,500 minimum I look for in a stock that has increased dividends as long as BDX has. If BDX grows its dividend at 15.0% per year, it will take 11 years to equal the cumulative earnings from a MMA yielding an estimated 20-year average rate of 4.61%. The 11 years is more than the 10 years maximum I like to see.
Other: BDX is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. In spite of the competitive landscape in the medical equipment market, BDX’s product line has favorable demand and pricing characteristics than the industry in general. BDX should continue to benefit from end-user demand in the life sciences industry, along with momentum in the diagnostics and diabetes management areas. In addition, the TriPath acquisition will provide exposure to cancer diagnostics. Risks include slower recovery in key life science markets, adverse patent litigation, and unfavorable foreign currency fluctuations.
Conclusion: BDX earned one Star in the Fair Value section, earned one Star in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a net total of three Stars. This quantitatively ranks BDX as a 3 Star-Hold.
Using my D4L-PreScreen.xls model, I determined the share price could decrease to $77.85 and BDX’s NPV MMA Differential would still be around the $3,000 that I like to see. At that price the stock would yield 1.83%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the $3,000 NPV MMA Differential I’m looking for, the calculated rate is 13.6%. This dividend growth rate is below the 15.0% used in this analysis.
After last week’s dividend increase, BDX now yields over 2.0%, one of the highest yields in the medical equipment industry. Historically, the company has enjoyed stability and growth in earnings and dividends. My buy below price for BDX is $77.85. At its recent price of $63.53, BDX is a good value.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I held no position in BDX (0.0% of my Income Portfolio) .
What are your thoughts on BDX?