Picked up some new Baxter shares this week. BAX trades for a very reasonable 14.3 times forward earnings and will contribute to my passive income stream with a healthy yield above 2.8%. Unfortunately BAX went ex June 4th so this batch of shares won't start paying till Q4. That's okay because I believe shares of the business should be worth $80. Therefore a small discount might be available right now. Calculating fair values isn't an exact science, but I do prefer to accumulate shares that appear discounted when possible.
Baxter plans to spinoff its biopharmeceutical business into a separate company next year. The rationale is that two separate companies will be more profitable long term than if they remained as one. Ok... Maybe they will be better off as two, or maybe not. I'm buying shares of Baxter as a business right now, not because I think I'll make out like a bandit because of a spinoff. That said, recent spinoffs (COP/PSX, ABT/ABBV) worked out well. I ended up selling PSX and ABBV. I don't regret selling Abbvie with its looming patent cliff at all. Certainly not a sleep well at night stock. But boy do I ever regret selling PSX! Huge mistake on my part.
BAX now has a 1.65% income weight. I'm not opposed to adding more shares.
Today's purchase was commission free. I currently have 8 free trades left and plan to use 4 during June / 4 during July.
Core Position: No
Speculative Position: No
Expectations: Steady income; 7% (average) annual dividend growth
Automatic Sell: Dividend cut (post spinoff), frozen dividend (post spinoff)
Consider Selling: Business fundamentally changes, management becomes untrustworthy, fundamentals deteriorate, wildly over valued stock price, or position fails to meet expectations