My Bullish Thesis

 CEO (Thomas Polan)

The company underwent a fairly recent change in leadership. Becton Dickinson & Co. ("BDX") was previously run by Vincent Forlenza; however, on January 28, 2020 he stepped down as CEO for Thomas Polan. Forlenza continues to serve on the Board of Director as executive chairman. Polan previously served as president and Chief Operating Officer ("COO") of BDX. Mr. Polan has a lot of experience 

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Solid Corporate Governance

This change in leadership is nothing to be concerned about. The market likes certainty and a change in leadership will often make a company's share price more volatile in the short term it could even cause a crash. However, this change in leadership was handled very professionally. Companies change their CEO from time to time and Mr Forlenza is in his mid 60's and probably looking to retire soon (who wants to work their entire life?). Additionally, Mr. Forlenza still serves on the Board of Directors so the company can continue to benefit from his experience. ​

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Long story short, the way that this succession was handled gives me confidence in corporate governance.

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The Bull Thesis

Who is Becton Dickinson & Co.?

The company was founded in 1897 by Maxwell Becton and Fairleigh Dickinson. BDX is an American medical technology company that operates internationally. The company develops, manufactures, and sells medical supplies, devices, laboratory equipment and diagnostic products. If you can find it in a hospital they make it and sell it.

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The company has three different business segments:

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BD Medical (Accounts for about $8.5 B of revenue)

This segment has four divisions: (1) Diabetes Care, (2) Medication Delivery Solutions, (3) Medical Management Solutions, and (4) Pharmaceutical Systems.

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Products in this segment include needles and syringes (of all types) and catheters.

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BD Life Sciences (Accounts for about $4.5 B of revenue)

This segment has two divisions: (1) Biosciences and (2) Diagnostics.

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Products in this segment include test tubes of all types, blood collection needles, and testing of microbiomes and molecular composition.

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BD Interventional (Accounts for about $3.5 B of revenue)

This segment has four divisions (1) Peripheral Intervention, (2) Surgery, and (3) Urology, and (4) Critical Care.

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Products in this segment include cell imaging machines (think MRI machines), laboratory products for handling gross test specimens, and kits and other machines for analyzing cells.

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**Disclaimer** I am not an expert in the medical field so I have way oversimplified things for reader pleasure. If I didn't understand it I left it out. BDX sells a lot of different products. If you can find it in a hospital they make it and sell it.

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Valuation

For many companies COVID-19 hurt their business dramatically. BDX was no exception. Although BDX operates in the medical field, it was not immune from the February 20, 2020 stock market crash. BDX played a key role in the development and manufacturing of the COVID-19 testing kits. However, while testing for COVID-19 increased the medical field as a whole did not. Many surgeries were delayed or cancelled leading to a decrease in the need for syringes, new testing machines, etc... Additionally, the change in leadership about a month before the crash added to the uncertainty surrounding the company.

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COVID-19 Vaccine

The good news is that the COVID-19 vaccine is finally here. Dr. Anthony Fauci has stated that, if everything goes according to plan (which it hasn't been with COVID-19), the vaccine will be available to the general public sometime at the end of March or beginning of April. Let's just estimate May to be safe.

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With the distribution of the COVID-19 vaccine comes an increases in need for needles and syringes to inject the vaccine. This is BDX's moment to shine. Additionally, with the distribution of the COVID-19 vaccine comes a return to normalcy for hospitals who will once again need testing, diagnostic equipment, new MRI machines, etc....

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I believe that BDX's business will return to normal with the rest of the industries that were harmed by COVID-19 and that the distribution of the needles required for the vaccine will primarily be extra income for the company. 

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Essential Business and Safety

The medical field is arguably the safest industry in the entire stock market. No matter what happens, hospitals will continue to operate and the companies that manufacture and sell the supplies that they use will almost always enjoy some degree of success. If you are highly risk averse this is a great company trading at a fair price.

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Dividend Aristocrat (Soon to be King)

• Dividend Size - BDX pays an annual dividend of $3.32 per share ($.83 per quarter), with a dividend yield of 1.30%

• Payout Ratio - BDX's current payout ratio is 32.55% (this means that the company pays out 32% of its earnings in the form of dividends). Remember, a payout ratio of between 35-55% is considered healthy and payout ratios higher than 55% are not uncommon. This means that BDX has plenty of room to continue paying out and growing its dividend for years to come.

• Dividend Security - BDX has paid and grown its dividend for the last 48 consecutive years and is increasing its dividend by an average of 2.86% each year. This grants BDX the title of a "Dividend Aristocrat."

• Dividend King Status - If the company continues to pay its dividend and raise that dividend for two more consecutive years then the company will earn the highly coveted title of "Dividend King.

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The Bear Thesis

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