My Top Dividend Growth Stock to Buy in July and Hold Forever
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.
- 10 stocks we like better than Becton ›
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%.
Should you buy stock in Becton right now?
Before you buy stock in Becton, consider this:
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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.
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