Top Dividend Growth Stocks — #5 Badger Meter

In the top five of our “Top 20 Dividend Growth Stocks, Badger Meter, Inc., comes in at #5. Badger Meter (BMI) makes flow measurement, control, and communication solutions in the United States, Asia, Canada, Europe, Mexico, the Middle East, and internationally. Serving municipal water utilities, commercial and industrial customers, BMI was founded in 1905; its headquarters is in Milwaukee, Wisconsin. Growth, longevity, and total return — it’s what you’d expect in the top five!

Badger Meter Inc (BMI) is Fully Certified, passing ALL Dividend System criteria. It has ‘Premier’ status being in the upper percentiles of this month’s stock universe. The company increased dividends for 36 years, making it a Dividend Aristocrat 25+. We consider BMI to be a Growth stock.

GROWTH:  BMI’s 5-year average dividend growth rate is 13%, slightly below the dividend universe average of 12.4%. Free cash flow has grown at an average rate of 32.3% per year for the last 5 years versus the dividend universe at 8.3%, so BMI is performing very well.

INCOME: BMI’s current dividend yield is .71%, less than half of the average at 2.65%. 

SAFETY: We use the Dividend Coverage Ratio to measure the dividend’s safety – higher is better. BMI has a DCR of 4.3 which is very good, more than double the minimum of 2. 

VALUATION: The price at time of analysis was $99.67, which we consider Overpriced. A fair price based on historical PE ratio and earnings would be around $53.11. The S&P500’s average PE ratio is 38.42, versus BMI’s PE ratio of 58.62,  50% or higher than the S&P 500 average PE. Our ‘Value Rating’ for Badger Meter Inc is .5 out of 5.0, meaning that  both PS and PE indicate the stock is very expensive, compared to other dividend stocks available.

TIMING: Historical Yield and PE tell us that BMI has ‘No ‘buy’ signal.’ Don’t eliminate a stock based on one factor (or lack thereof). 

QUALITY: Our quality formula gives BMI a ‘Quality Rating’ of 4.3 (out of 5), versus the average of 2.7 for this month’s dividend universe.

TOTAL RETURN: Over the last 15 years, the compound annual growth rate for an investment in Badger Meter Inc was 15.34% per year with dividends reinvested, versus the S&P500 Total Return of around 11% per year for the same time period. As you can see, BMI is doing better than the market with dividends reinvested.

Compared to all dividend stocks paying 7 years or more of increasing dividends, we rate Badger Meter Inc a ‘A-.’

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How would you measure BMI’s flow? Probably with one of their own devices — tell us what you think of BMI!

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