Wednesday, 21 November 2012

A look at Becton Dickinson


I’ve been waiting a very long time to add Becton Dickinson to my portfolio. The last time it traded at $72, I had no cash left in my RSP account. All my US stocks are held in my RSP account in order to avoid withholding taxes on dividends. At the time of writing, BDX trades at $77. Is this a good price?

Average Dividend Yield*

BDX
Year
High Price
Low Price
1Q
div.
2Q
div.
3Q
div.
4Q
div.
Annual Dividend
High Yield
Low Yield
2000
$35.31
$23.75
$0.0925
$0.0925
$0.0925
$0.0925
$0.37
1.56%
1.05%
2001
$39.25
$29.96
$0.095
$0.095
$0.095
$0.095
$0.38
1.27%
0.97%
2002
$38.60
$24.70
$0.0975
$0.0975
$0.0975
$0.0975
$0.39
1.58%
1.01%
2003
$41.82
$28.82
$0.10
$0.10
$0.10
$0.10
$0.40
1.39%
0.96%
2004
$58.18
$40.90
$0.15
$0.15
$0.15
$0.15
$0.60
1.47%
1.03%
2005
$61.17
$49.71
$0.18
$0.18
$0.18
$0.18
$0.72
1.45%
1.18%
2006
$74.25
$58.08
$0.215
$0.215
$0.215
$0.215
$0.86
1.48%
1.16%
2007
$85.89
$69.30
$0.245
$0.245
$0.245
$0.245
$0.98
1.41%
1.14%
2008
$93.24
$58.14
$0.285
$0.285
$0.285
$0.285
$1.14
1.96%
1.22%
2009
$79.97
$60.40
$0.33
$0.33
$0.33
$0.33
$1.32
2.19%
1.65%
2010
$85.50
$66.47
$0.37
$0.37
$0.37
$0.37
$1.48
2.23%
1.73%
2011
$89.75
$69.59
$0.41
$0.41
$0.41
$0.45
$1.68
2.41%
1.87%
2012


$0.45
$0.45
$0.45
$0.495
$1.85


2013


$0.495
$0.495
$0.495
$0.495
$1.98












Stock prices and dividends are per calendar year.
12y ave
1.70%
1.25%
Dividends are recorded in the quarter they were paid.
5y ave
2.04%
1.52%







3y ave
2.28%
1.75%







5y
$97.05
$129.97







3y
$87.02
$113.07






Super Cheap
$82.02



The table shows the 3 year average dividend yield to be 2.28% ((2.19% + 2.23% + 2.41%)/3). I use the numbers in the “High Yield” column for obvious reasons.

Using the current cash dividend of $1.98, one would have to pay $87.02 for a 2.28% yield.

BDX’s dividend yield has slowly been creeping up since 2009. Buying the stock at its low in 2011 would have earned you an initial yield of 2.41%. Using the current dividend, that corresponds to a stock price of $82.02 today (see “super cheap” price in the table above).

Graham Price

BDX’s 2010, 2011 and 2012 EPS were $4.90, $5.59 and $5.30. 3Y Ave EPS = $5.45.
BDX’s book value is $21.22.
Graham Price = SQRT (3Y Ave EPS * BV * 22.5) = $50.99

Cyclically Adjusted Price to Earnings Ratio

BDX’s 10Y Ave EPS = $3.84
CAPE = 10Y Ave EPS / Stock Price = $76.90/$3.84 = 20.03
A CAPE below 20 is good.

Conclusion

BDX increased is EPS from 1.49 in 2001 to $5.30 in 2012. That’s an increase of 3.5 times over 11 years. Not bad!

Considering the information above, along with BDX's latest dividend increase, I have increased my entry price from the low 70’s to the mid 70’s. Looks like I may have to wait longer before initiating a position.


*My method is not perfect as the stocks low price may have occurred before the annual dividend increase. 


2 comments:

  1. My entry price is around the $73-74 area and I hope that it'll come down to that level soon. Although there's lots of stocks that are really close to where I'd like to initiate or add to positions so a broad market selloff that brings everything down will be great but also a pain because I won't have enough capital to make all the purchases I'd like. BDX is high on the list though.

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    Replies
    1. Hey PIP. I have been away on business for some time now which is why I haven't been able to answer sooner. It would be great if the market sell off could continue for months to come. It's funny how the market has gone back up slightly, but nothing has been resolved.

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