Dividend Conundrum: Leggett & Platt’s 4.4% Yield vs. Becton Dickinson’s 2.4% -- Surprise

Rooting around for income-producing investments these days, one quickly bypasses 10-year Treasuries and is on to dividend stocks, and few places are better to start at than the list of S&P 500 Dividend Aristocrats.

10 Year Treasury Rate Chart

10 Year Treasury Rate data by YCharts

There, you’ll find an exclusive club of companies that raised their payouts annually for at least 25 years. They tend to be slow-growing, solidly-managed and devoted to sending checks to shareholders, including such household names as McDonald's (MCD), Coca-Cola (KO) and Johnson & Johnson (JNJ). Two of the more prosaic businesses among the Aristocrats are Leggett & Platt (LEG), which makes furniture components, a dreary business that it nevertheless dominates and squeezes nice margins out of, and Becton Dickinson (BDX), a maker of medical supplies including needles and such.

Right now, a quick look at the two stocks might steer you toward Leggett & Platt. After all, its dividend yield of 4.4% is tempting, and its most recent performance includes positive revenue growth. Becton Dickinson, meanwhile, offers a dividend yield of a mere 2.4% and most recently had a down quarter on revenue.

But let’s take a look at the long term (history is no guarantee of future performance, but it’s worth noting). Over the past ten years, each has continually boosted their dividend but look at the difference:

BDX Dividend Chart

BDX Dividend data by YCharts

Becton Dickinson is also far more conservative with its cash, paying out a much smaller percentage of earnings in dividends. Thus, it would seem to have more potential for dividend hikes going forward.

BDX Payout Ratio TTM Chart

BDX Payout Ratio TTM data by YCharts

Yield junkies have also bid up Leggett & Platt’s stock, so its PE ratio, at about 21, is very pricey compared to Becton Dickinson’s PE ratio, at about 14. And over the long haul, Becton Dickinson has been more of a growth company.

BDX Revenue TTM Chart

BDX Revenue TTM data by YCharts

Today’s dividend yield may seem skimpy, but if Becton Dickinson continues its historical pattern, long-term holders will be richly rewarded, as suggested by a stock chart.

BDX Chart

BDX data by YCharts

Jeff Bailey is the editor of YCharts, which includes the just-released YCharts Pro Platinum for professional investors.

Read more articles about: Company Analysis  

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