Tuesday, August 4, 2015

What should I do with Baxter and Baxalta after the split?

Note: I originally planned to post this article tomorrow, but in light of recent developments about Baxalta being in the process of being taken over by Shire, I am posting it today. I sold two-thirds of my Baxter and Baxalta shares yesterday. 

In early July, Baxter International split into two companies – Baxter and Baxalta. For every share of legacy Baxter, shareholders received a share of new Baxter (BAX) and a share of new Baxalta (BXLT).

A few readers had asked me about the new dividend payments after a press release from late June indicating that there might be a decrease in dividends. I decided to hang on, until both companies formally announced what their dividend policy will be.

Both companies recently announced dividend cuts effective in September. The new payment for Baxter will be 11.50 cents/quarter, while the payment for Baxalta will be 7 cents/quarter. This totals 18.50 cents/quarter, which is much less than the 52 cents/quarter that legacy Baxter paid to shareholders.

My goal as an investor is to generate a rising stream of income from my dividend growth portfolio. As such, I purchase shares in companies that can afford to and do grow dividends per share over time. I have found that it is easier to forecast and rely upon dividend income, rather than capital gains in the retirement years. Therefore, companies that have cut dividends have no place in my portfolio since they are no longer fitting with my overall goals and objectives that made them a purchase in the first place.

Read the article on Seeking Alpha

Full Disclosure: Long BAX and BXLT, ABBV, ABT, GE, BP, VRE, KMB

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