Thursday, October 20, 2011

Becton Dickinson (BDX) 2001 Review

Becton Dickinson (BDX) produces a wide range of medical devices as well as products for the collection and transport of diagnostic specimens, instruments for analysis and testing for infectious diseases and research and clinical tools for the study of cells.

The company has grown profits and dividends at a 13-15% annual pace over the last 10 years earning a 20%+ rate of return on equity.

The company should sustain its growth via:

(1) growth of safety needle-free products. BDX is a world leader in this market which is growing at a 12% annual rate globally. Recently, the European Union adopted safety requirements that will have positive impact on needle sales in Europe,

(2) the safety products are sold at premium prices yet have a very low cost of production, thereby improving margins,

(3) the equally attractive rate of growth of the remainder of its well diversified product line [diabetes care, surgical equipment, ophthalmic systems, diagnostic systems and immunocytometric systems],

(4) a newly instituted cost containment program,

(5) strong cash flow allows a continuing stock buy back program,

(6) international expansion.


(1) high unemployment reduces the demand for medical care, in particular, testing,

(2) highly competitive industry,

(3) its international operations subject to risk of losses from currency fluctuations,

(4) rising raw material costs.

BDX is rated A++ by Value Line, has a debt to equity ratio of about 32% and its stock yields 2.0%.

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2001
BDX 2.0% 11% 28% 10
IND 1.4 8* 23 NA
Debt/Equity ROE EPS Down Since 2001 Net Margin Value Line Rating
BDX 32% 26% 1 17% A++
IND 36 20 NA 18 NA

*over one half of companies in BDX industry do not pay dividends


Note: BDK stock made steady progress off its March 2009 low, eventually surpassing the down trend off its January 2008 high (red line) and the November 2008 trading high (green line). The stock broke its long term up trend (the straight blue line is the lower boundary) during the March 2009 sell off and eventually re-set to an intermediate term trading range (purple lines). Short term, BDX is in an up trend (brown lines). The wiggly blue lines are Bollinger Bands. The Aggressive Growth Portfolio owns a full position in BDX. The upper boundary of its Buy Value Range is $63; the lower boundary of its Sell Half Range is $114.