Key Points
Becton, Dickinson supplies the world with lots of medical equipment.
Much of its offerings generate reliable recurring revenue.
It's long been a dividend grower, too.
If you're seeking solid dividend-paying stocks for your portfolio, don't just look for the fattest dividend yields. For one thing, many high-yielding stocks are high-yielding simply because their stock prices have fallen hard -- very possibly for good reason. Also, it's important to focus not just on a dividend's size, but also its growth rate.
Imagine, for example, that you're thinking of investing in Company A or Company B. The yield for A is 3% and for B, 2%. It might seem smarter to invest in A, but if B's dividend payout is growing at a good clip, its yield could surpass that of A within a few years. Of course, you'll also want to evaluate much more than just dividend yields.
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Consider Becton, Dickinson
Here's a very promising dividend payer to consider: Becton, Dickinson (NYSE: BDX), also known as "BD." It's a medical products company, collecting much of its revenue from products such as syringes, blood collection tubes, catheters, infusion systems, and so on. Such items are always needed, so they provide a lot of recurring revenue. Indeed, 90% of the company's revenue is from such consumables.
Becton, Dickinson recently yielded 2.7%, which is pretty good. (The S&P 500's overall dividend yield has been roughly 1.1% for a long time now.) Better still, that payout is growing briskly: It averaged annual growth of 10.5% over the past five years. On top of that, the company has been hiking its payout annually for 54 years -- so far.
Becton, Dickinson's stock is attractively priced at recent levels, too, with a recent forward-looking price-to-earnings (P/E) ratio of 12, well below its five-year average of 16. And its price-to-sales ratio was recently 2.2, below its five-year average of 3.2.
Here's another bonus for shareholders: The company has been buying back (and retiring) lots of its stock -- leaving remaining shares worth more. If you combine the dividend yield and the effect of share buybacks, the company's recent total yield is 8.3%.
Selena Maranjian has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.