Baxter International (BAX) recently revealed that its Board of Directors announced an increase in its quarterly dividend to 33.5 cents for each common share from the previous dividend of 31 cents. The dividend is payable as of January 4, 2012, to shareholders of record as of the close of business on December 9, 2011. The revised quarterly dividend amounts to an annual dividend of $1.34 per share, which is an increase of about 8% over the previous annual dividend of $1.24.
Baxter’s cash flow generation continues to be robust. The company is returning notable amounts to its shareholders in the form of share repurchases and dividends. During the first three quarters of 2011, Baxter returned a total amount of $1.95 billion to shareholders, comprising $1.41 billion of share repurchases and $534 million of dividends.
The news regarding Baxter still remains mixed. On the positive side, Baxter’s focus on life-sustaining products, which are not commoditized, partly insulates it from an economic downturn. The company is able to generate recurring revenues, and consistent cash flow, due to its focus on chronic diseases.
On the flip side, despite recent stability in Plasma Proteins and Antibody Therapy sub-segments, we are concerned about sluggishness in sales, a slightly somber outlook for some hospital spending and tightening of reimbursement.
Improved execution has lifted sentiment somewhat toward Baxter. The company is a good bet for value investors willing to wait as fundamentals improve further. Among others, it competes with Becton, Dickinson and Co. (BDX) in certain niches. We are currently Neutral on the stock, backed by a short-term Zacks #3 Rank (Hold).
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