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Becton, Dickinson and Company (NYSE:BDX) Looks Interesting, And It's About To Pay A Dividend

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Becton, Dickinson and Company (NYSE:BDX) stock is about to trade ex-dividend in three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Becton Dickinson's shares before the 8th of September in order to be eligible for the dividend, which will be paid on the 30th of September.

The company'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 1.3% on the current share price of $257.83. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Becton Dickinson can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Becton Dickinson

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Becton Dickinson is paying out an acceptable 51% of its profit, a common payout level among most companies. 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. Luckily it paid out just 25% of its free cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Becton Dickinson's earnings per share have been growing at 13% a year for the past five years. Becton Dickinson has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Becton Dickinson has increased its dividend at approximately 7.3% a year on average. 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.

To Sum It Up

From a dividend perspective, should investors buy or avoid Becton Dickinson? We like Becton Dickinson's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Becton Dickinson looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Becton Dickinson has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 3 warning signs for Becton Dickinson that you should be aware of before investing in their shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.