We recently compiled a list of 10 Best Dividend Aristocrats According to Wall Street Analysts. In this article we are going to take a look at where Becton, Dickinson and Company (NYSE:BDX) stands against the other dividend aristocrats.

Shifts in investment trends have revealed new insights for investors in recent years. Certain times call for specific investments, and it’s often experienced investors who can spot these opportunities. However, it’s clear that the value of a good investment remains steady, even amidst ongoing changes. This is where the long-standing dividend aristocrats play a role. These companies are strong dividend payers, having raised their payouts for at least 25 consecutive years.

The extended periods of dividend increases have significantly boosted the impressive returns of these stocks over time. Since its inception in 2005, the Dividend Aristocrats Index has outperformed the broader market with lower volatility, according to a report by ProShares. In addition, these stocks demonstrated strong performance in all market conditions, capturing 90% of market gains while only experiencing 82% of market declines. Also read: 10 Best Dividend Aristocrats with Over 3% Yield.

Achieving 25 consecutive years of dividend growth is quite an accomplishment. Out of approximately 6,000 stocks listed on the NYSE and Nasdaq, only 67 are part of the prestigious Dividend Aristocrats index in 2024. This highlights that only a small number of companies have reached this milestone. Maintaining a record of annual dividend increases for 25 years means the company has managed to boost shareholder payouts through various challenges, including the dot-com bubble, the 2007 financial crisis, and the pandemic. This reflects a robust business model, strong cash flow visibility, and disciplined management of capital. Even dividend aristocrats can struggle with consistency, as we’ve seen recently. Companies like Walgreens and 3M were unable to sustain their decades-long dividend growth streaks and have been removed from the Dividend Aristocrats club this year. This highlights the importance of financial strength for dividend aristocrats. The Great Financial Crisis exposed the financial vulnerabilities of these dividend-growers, as 17 out of the 60 Aristocrats in the S&P 500 were removed in 2008 and 2009.

As mentioned before, dividend aristocrats have consistently outperformed the broader market since their inception, even during market downturns. Don Kilbride, a senior managing director and portfolio manager at Wellington Management, has noted this performance, particularly with the Vanguard Dividend Growth fund, which he manages. This fund focuses on companies that have reliably increased their dividends annually, some for decades. During the 2008 market crash, while the market fell 37%, Vanguard Dividend Growth only lost about two-thirds of that amount, thanks to its dividend-generating stocks. As the market recovered, the fund quickly made up for its losses, outperforming many of its peers. Kilbride further mentioned that dividend growth is crucial for weathering tough markets and achieving long-term success, stating that its benefits are substantial and enduring.

According to analysts, for those building their portfolios, incorporating dividend investments can be beneficial, particularly if the dividends are reinvested. By using dividends to purchase additional shares each time they are received, investors create a cycle where payouts increase with the number of shares owned, leading to the ability to acquire even more shares. In this article, we will take a look at some of the best dividend aristocrat stocks according to analysts.

Our Methodology:

For our list, we first scanned a list of the best dividend aristocrat stocks, which are the companies that have raised their dividends for 25 consecutive years or more. From this group, we picked stocks with a projected upside potential of over 10% based on analyst price targets. The stocks are ranked according to their upside potential, as of August 7. We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 920 funds as of Q1 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).

Becton, Dickinson and Company (NYSE:BDX)

Analyst Upside Potential as of August 7: 17.6%

Becton, Dickinson and Company (NYSE:BDX) is an American medical device company that also specializes in instrument systems and reagents. The company continues to focus on expanding production capacities, forging strategic partnerships, and driving innovation across its product lines. While these strategic acquisitions have been widely praised by many investors, they are not equally well-received by all. Madison Investments also highlighted this aspect in its Q2 2024 investor letter. Here is what the firm has to say:

“During the quarter, we sold our stake in Becton, Dickinson and Company (NYSE:BDX). Becton is a leading global medical technology and diagnostics company. We admire its dominant market position spanning a vast array of consumable medical products. However, in more recent years, the company has pursued a capital allocation strategy focused a bit more on acquisitions than we’d prefer, and has had operational hiccups in some product lines and geographies. While we believe the company will manage through the issues, we decided to sell to fund more attractive opportunities.”

In the fiscal third quarter of 2024, the company has achieved strong performance across various segments of its portfolio, with accelerated margin expansion and cash flow, thanks to the growing success of its BD Excellence operating system. It is evident that the teams are successfully transforming BD into the innovative MedTech leader envisioned with the launch of the BD 2025 strategy. The company’s concentrated efforts have positioned it to meet its revised fiscal 2024 earnings guidance and to reach its long-term objectives.

Becton, Dickinson and Company (NYSE:BDX) generated nearly $5 billion in revenues in fiscal Q3 2024, which showed a 2.3% growth from the same period last year. The cash position also remained favorable for income investors. Year-to-date cash from continuing operations increased by 60% to $2.7 billion, while free cash flow more than doubled to $2.2 billion. This represents an increase of $1.0 billion and $1.2 billion from the previous year, respectively. Street analysts hold a consensus Strong Buy rating on BDX with a $278.5 price target, which showed a 17.6% upside potential.

On July 23, Becton, Dickinson and Company (NYSE:BDX) declared a quarterly dividend of $0.95 per share, which was in line with its previous dividend. Overall, the company has been rewarding shareholders with growing dividends for the past 52 years, which makes it one of the best dividend aristocrat stocks on our list. The stock supports a dividend yield of 1.63%, as of August 7.

According to Insider Monkey’s database, 60 hedge funds owned stakes in Becton, Dickinson and Company (NYSE:BDX) at the end of Q1 2024, the same as in the previous quarter. These stakes have a collective value of over $2.5 billion. With over 3.2 million shares, Generation Investment Management was the company’s largest stakeholder in Q1.

Overall BDX ranks 5th on our list of the best dividend aristocrats to buy according to Wall Street Analysts. While we acknowledge the potential of BDX as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than BDX but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.

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Disclosure: None. This article is originally published at Insider Monkey.