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In a bid to deploy capital to boost shareholder value, Becton, Dickinson and Company (BDX - Analyst Report) announced that its board has approved a hike in quarterly dividend. Per the announcement, the dividend will be raised by 10% to 49.5 cents per common share. The revised dividend is payable on December 31, 2012 to shareholders of record as on December 10, 2012.

This raise in dividend increases the annual dividend for fiscal 2013 to $1.98 per share. The announcement marks the 41st successive annual dividend hike for Becton, Dickinson. This trend reflects the company’s ability to sustain profitable growth in the longer-term.

Apart from the dividend hike, Becton, Dickinson also plans to repurchase $500 million shares in fiscal 2013, subject to market conditions, to increase shareholder value. This reflects the company’s balanced approach toward its objective of returning wealth to shareholders.

The capital deployment activities of Becton, Dickinson reflect a strong performance profile amid a tough economic backdrop. The company’s dividend yield of 2.6% is marginally higher than its closest peer, Baxter International’s (BAX - Analyst Report) dividend yield of 2.4%. Becton, Dickinson’s payout ratio of 36.1% compared with Baxter’s payout ratio of 35.6% reveals its ability to generate improved earnings. The view is supported by its narrow win over the Zacks Consensus Estimate in the fourth quarter and fiscal 2012.

We believe that the dividend hike might partially offset the impact of the potential increase in tax on dividends. Also, the dividend hike might be an attempt to drive share price as dividend stocks are likely to be under pressure due to the potential increase in tax next year.

We remain cautious about Becton, Dickinson due to the lack of major short-term catalysts. Previously, growth was driven by the rising demand for safety-needle products (with higher price points and margins). However, it is not expected to continue, given the U.S. market is already largely penetrated.

On the positive side, Becton Dickinson’s pre-eminent global healthcare products franchise is partly insulated from the volatile macroeconomic conditions and structural deficiencies elsewhere in the healthcare delivery field.

We currently have a long-term ‘Neutral’ recommendation on Becton, Dickinson. The stock carries a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.

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