Quarterly cash dividend
Baxter International (BAX) announced a quarterly cash dividend of $0.13 per share on July 19, 2016. It’s payable on October 3, 2016, to shareholders of record as of September 2, 2016. It’s higher than the quarterly dividend of $0.12 per share paid out by the company in the three quarters following the Baxalta spin-off.
The company had been consistently paying dividends of $0.52 per share before the Baxalta spin-off. The company received $4 billion in cash dividends and retained around a 19.4% stake in Baxalta after the spin-off in July 2015. The proceeds are being used to repay debt obligations and pay dividends to its shareholders.
Baxter’s capital allocation strategy
Baxter International has followed a disciplined approach to capital allocation over the years. The company has been focused on balanced reinvestment in its business for sustainable growth and returning value to shareholders through share buybacks and dividend payments. Since the Baxalta spin-off, Baxter has aimed for a dividend payout ratio of approximately 35% of the adjusted net income.
Baxter International expects to generate operating cash flows of more than $1.4 billion for the full year 2016. The company is committed to lowering its debt obligations and has a strong balance sheet. It reflects lower debt balances as the company paid off $3.7 billion of its debt through the use of proceeds from the equity stake in Baxalta. To learn more about the benefits of the Baxalta spin-off to Baxter, read How Baxter’s Biosciences Spin-off into Baxalta Improved Its Valuation.
Baxter International has a dividend yield of about 1.1%. Peers CR Bard (BCR), Becton Dickinson (BDX), and ResMed (RMD) have dividend yields of around 0.46%, 1.5%, and 2.1%, respectively. If you’re interested in getting diversified exposure to Baxter International, you can invest in the PowerShares Dynamic Pharmaceuticals Portfolio (PJP), which holds ~4.1% in Baxter.
In the next part of the series, let’s have a look at the company’s latest valuation.