Dividend Increase | Becton, Dickinson & Company (BDX)

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks BDX for the dividend increase!

There's an old Chinese proverb that says "the best time to plant a tree was 20 years ago, the next best time is now".  The reason for this is that it takes time for a tree to grow and prosper and for you to start reaping its benefits.  Dividend growth investing is much the same way.  It takes consistent saving and investing as well as time and patience to let the power of dividend growth take hold.

That's why one of my favorite things is when one of the companies I own decides to pay out more in dividends.  You mean I get a pay raise just for owning a small piece of a company?  Not going and doing R&D for new products or technology.  Not selling any products.  Not managing any employees or inventory.  Not making sales calls.  All I had to do was have the foresight to invest some of my savings in excellent companies.  

On November 24th the Board of Directors at Becton, Dickinson & Company (BDX) approved an increase in the quarterly dividend payment from $0.79 up to $0.83.  That's a solid 5.1% increase from BDX.  Becton, Dickinson is a Dividend Champion with 49 consecutive years of dividend growth.  Shares currently yield 1.46% based on the new annualized payout.

The new dividend will be payable December 31st to shareholders of record as of December 10th.  

Since I own 14.877 shares of Becton, Dickinson in my FI Portfolio, this raise increased my forward 12-month dividends by $2.38.  This is the 6th dividend increase I've received from BDX since initiating a position in April 2015.  Total organic dividend growth over that time is a modest 38.3%.  

I also own 25.826 shares in my Rollover IRA and this raise increased my forward 12-month dividends for that account by $4.13.

A full screen version of this chart can be found here.

Becton, Dickinson's dividend growth has historically been fantastic especially in light of the length of their streak.

Dating back to 1971 there's been 49 rolling 1-year periods and BDX has given 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 same time there's been 44 rolling 5-year periods with dividend growth ranging from 5.4% to 21.4% with an average of 11.3% and a median of 10.5%.

There's been 40 rolling 10-year periods during 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%.

Becton, Dickinson's dividend growth has been lackluster the last few years although based on history this isn't out of the norm.  This is the 5th period where they've had low single digit dividend growth for a few years and thus far dividend growth has returned to higher levels every time.  

Dividend growth has been muted the last few years due to the acquisition that was completed that increased their debt levels.  Management has been committed to de-levering which I'm more than fine with as a business owner.

The 1-, 3-, 5- and 10-year rolling dividend growth rates since 1962 can be found in the following chart.  

A full screen version of this chart can be found here.

For dividend yield theory I consider the fair value range to be the forward dividend yield +/- 10% compared to the 5 year moving average, the under/over value area to be to between 10%-20% deviation from the average and significant over/under value are greater than a 20% deviation from the average.

A full screen version of this chart can be found here.

Becton, Dickinson &  Company's 5-year average forward dividend yield is 2.40% which corresponds to a share price of $237 based on the new annualized payout.  

I consider the fair value range based on dividend yield theory to be the 5-year moving average yield +/- 10%.  That gives a fair value range of $215 - $263 and suggests that Becton, Dickinson is trading around fair value at this time.

Wrap Up

This raise increased my forward dividends by $2.38 with me doing nothing.  That's right, absolutely nothing to contribute to their operations.  Based on my FI Portfolio's current yield of 2.53% this raise is like I invested an extra $94 in capital.  Except that I didn't!  One of the companies I own just decided to send more cash my way. 

That's how you can eventually reach the crossover point where your dividends received exceed your expenses.  That's DIVIDEND GROWTH INVESTING AT WORK!  The beauty of the dividend growth investing strategy is that you build up your dividends through fresh capital investment as well dividend increases from the companies you own.

I've now received 39 raises from the companies in my FI Portfolio increasing my forward-12 month dividends by $290.93.

My FI Portfolio's forward-12 month dividends are $7,599.39  Including my FolioFirst portfolio's forward dividends of $104.65 brings my total taxable accounts dividends to $7,704.04.  My Roth IRA's forward 12-month dividends are $66.91.  My Rollover IRA's forward dividends are $3,181.21.  Across all accounts I can expect to receive $11,562.16 in dividends over the next year.

I've also started compiling dividend data on many of the companies that I own or would like to own.  Becton, Dickinson & Company's can be found here which includes the dividend history (as far back as I can find without spending hours hunting it down), rolling dividend growth rates and dividend yield theory.  To see other companies that I've already gathered the data on you can check out the Dividend Companies page.  Check it out and let me know what you think.

Do you own shares of Becton, Dickinson & Company?  Do you think dividend growth will return to high single to low double digit annual raises?

Please share your thoughts below.