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The Top 10 S&P 500 Companies with the Lowest Dividend Growth

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Part 6
The Top 10 S&P 500 Companies with the Lowest Dividend Growth PART 6 OF 18

How Did the Dividend Cut Affect BAX’s Dividend Yield?

Why BAX’s net sales picked up in 2016 after falling in 2015

Baxter International’s (BAX) net sales fell 7.0% in 2015 before gaining 2.0% in 2016. The net sales of its Renal and Hospital Products segments picked up in 2016 after falling in 2015. Its US net sales recorded growth in both years, although this growth was offset by declining sales in Europe, Latin America, and Canada.

BAX’s Asia-Pacific net sales rose in 2016 after falling in 2015. This recovery took place following a recovery in the industry.

How Did the Dividend Cut Affect BAX’s Dividend Yield?

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How BAX’s EPS recovered in 2016 after falling in 2015

Baxter International’s (BAX) costs and expenses fell 5.0% and 1.0% in 2015 and 2016, respectively. As a result, its operating income fell 32.0% in 2015 before rising 61.0% in 2016.

A further decrease in its interest expenses translated into a 61.0% fall in its 2015 earnings per share (or EPS) before growing 412.0% in 2016. Other income enhanced the 2016 EPS number.

Why BAX’s 9M17 EPS fell despite revenue growth

Baxter International’s net sales recorded 4.0% growth in 9M17, driven by every segment of the company. BAX’s costs and expenses fell 4.0%, leading to 121.0% growth in operating income.

BAX’s EPS fell 83.0% due to the absence of other income. The company did not generate enough free cash flow in 2015 to pay off its dividends.

How Did the Dividend Cut Affect BAX’s Dividend Yield?

How has BAX’s dividend yield evolved?

Baxter International (BAX) underwent a 60.0% dividend cut in 2016 before growing 21.0% in 2017. Its price gained 16.0% in 2016 and 47.0% on a year-to-date (or YTD) basis. This trend explains the downward sloping dividend yield curve in 2016 followed by a flattened curve in 2017.

Baxter International has a dividend yield of 1.0%, a PE (price-to-earnings) ratio of 7.3x, and a YTD return of 47.5%. These readings compare to a sector average dividend yield of 0.8% and a PE ratio of 83.7x.

Comparison with broad indexes

The S&P 500 (SPX-INDEX) (SPY) offers a dividend yield of 2.3%, a PE ratio of 22.7x, and a YTD return of 15.5%. The Dow Jones Industrial Average (DJIA-INDEX) (DIA) has a dividend yield of 2.3%, a PE ratio of 21.2x, and a YTD return of 18.7%. The NASDAQ Composite (COMP-INDEX) (ONEQ) has a PE ratio of 25.4x and a YTD return of 25.4%.

The WisdomTree US Dividend Growth Fund (DGRW) is a dividend ETF with exposure to Baxter International. It has a PE ratio of 20.3x and a dividend yield of 2.6%. The iShares Core Dividend Growth ETF (DGRO) is a dividend ETF with exposure to Baxter International. It has a PE ratio of 20.6x and a dividend yield of 2.0%.

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