I sold out of my positions this morning in both BAX and the spinoff, BXLT.
Strike 1 – Low portfolio weight
Ok, to be honest this one isn’t as big of a deal. If I really believed in the companies then I could build them up to full positions but I think my money can be better deployed elsewhere. Both positions were relatively small compared to the rest of my portfolio at a portfolio weight less than 0.50%.
I just couldn’t see myself adding additional capital to bring either company up to a full weight soon.
Strike 2 – Lower dividend payment
A lot of the decision is based on the lower dividend payments. Pre-spinoff, Baxter paid out 0.52 quarterly in dividends. The new cash dividend is 0.115 per quarter. BAX is now yielding 1.09%. This might be ok if the BXLT spinoff makes up for it. However, BXLT with a quarterly dividend of $0.07, has a paltry dividend yield of 0.72%.
To be honest, I’d rather build up another healthcare sector position like MDT that yields 1.95 % or JNJ that yields 3.0%.
Strike 3 – Limited upside
With a forward P/E over 30 for BAX and a spike due to a buyout offer on BXLT, my decision was made. I don’t mind lower dividend paying companies as long as I believe their growth can make up for that. I made my decision to deploy cash elsewhere.
I sold 20.7283 shares of both BAX and BXLT for $42.00/share and $38.00/share respectively and received proceeds of about $1600.
With the proceeds, I’m looking at deploying that capital into some higher paying dividend companies at better valuations like CVX, BBL, TD, UNP and a few others.