Badger Meter, Inc. (BMI): A Stealthy Dividend Grower with Hidden Potential

In an era where high-profile tech stocks dominate headlines, Badger Meter, Inc. (BMI) operates quietly in the background—literally and figuratively. This Wisconsin-based company, a leader in flow measurement and data analytics for water and gas utilities, has quietly built a compelling dividend growth story over the past decade. While not yet a Dividend Champion (which requires 25+ years of consecutive increases), BMI’s seven-year streak of annual dividend hikes since 2018 positions it as a contender for investors seeking steady income growth in an overlooked sector. Let’s dissect its potential.

The Dividend Story: Resilience After Stumbles

Badger Meter’s dividend history is a tale of recovery. After initiating dividends in 2012 at an annualized $0.67, the company faced headwinds in 2015–2017. Dividends dipped to $0.66 in 2016 and $0.505 in 2017—a 23.5% drop from 2016—likely due to industry-specific challenges, including declining municipal budgets and delayed infrastructure projects. But since 2018, the company has shown remarkable discipline, growing dividends at a blistering pace:
- 2018: +14.9% to $0.58
- 2023: +12.2% to $0.875
- 2024: +24.6% to $1.29

By 2025, the annual dividend is projected to hit $1.29, with quarterly payments rising to $0.34. This trajectory reflects a focus on shareholder returns, even as the company navigates a conservative $0.8% dividend yield—low by traditional dividend standards but offset by robust growth.

Business Model: Utilities’ Quiet Partner

BMI’s niche is mission-critical: it provides smart meters, sensors, and data platforms to utilities managing water, oil, gas, and chemical distribution. With over 100 years in the industry, it serves 18,000+ clients worldwide, including municipalities and energy companies. Its Software as a Service (SaaS) offerings, such as its iMetrica platform, are increasingly critical for utilities seeking real-time data to detect leaks, reduce waste, and comply with regulations. This shift to recurring software revenue could insulate BMI from cyclical hardware sales.

Financial Health: Growth Amid Caution

BMI’s 2023 revenue hit $556 million, up 7% YoY, with net income rising 12% to $52 million. Its balance sheet is solid: $120 million in cash, no long-term debt, and a conservative payout ratio of 40% (dividends vs. earnings), leaving room for further hikes. However, its reliance on utilities—a slow-growth sector—means expansion hinges on global infrastructure spending. The U.S. Inflation Reduction Act (IRA) and EU’s Green Deal could boost demand for water and energy efficiency tech, giving BMI tailwinds.

Risks and Considerations

• Dividend Yield Lag: At 0.8%, BMI’s yield is far below the S&P 500’s 1.5% average. Investors must prioritize growth over immediate income.
• Market Volatility: The stock’s beta of 1.2 means it swings more than the broader market during downturns.
• Competitive Landscape: While BMI dominates its niche, larger players like Siemens and Honeywell may encroach on software-driven analytics.

Valuation: A Fair Price for Growth?

At $201.63 per share (as of April 2025), BMI trades at a P/E of 38.5x, significantly above its five-year average of 25x. This premium reflects investor optimism about SaaS growth, but it leaves little margin for error. A more attractive entry point might emerge if the stock dips below $180—a level consistent with its 2023 valuation.

Conclusion: A Worthwhile Bet for Patient Investors

Badger Meter isn’t a Dividend Champion yet, but its post-2018 turnaround and seven-year growth streak suggest it could become one. With a fortress balance sheet, a focus on recurring software revenue, and secular tailwinds in infrastructure, BMI offers a compelling blend of stability and upside. While the low yield may deter income purists, growth-oriented investors seeking exposure to utilities’ digital transformation could find value here—provided they’re willing to look beyond the spotlight.

Final Take:
- Buy Below $180 for a more reasonable valuation.
- Hold if you believe in the long-term shift to smart infrastructure.
- Avoid if you demand immediate high yield or fear sector-specific headwinds.

BMI’s story isn’t flashy, but in an era of overhyped tech stocks, sometimes the quiet companies deliver the loudest returns.