Friday, August 7, 2015

Recent Sell

Dividend Growth Stock Blog

Hopefully, I don't do this too often.

As some of you may know, I decided to sell my positions on both Baxter (BAX) and Baxalta (BXLT). When I first drafted up my dividend stock investment strategy last year, my key criteria for selling is if the dividend was cut.

I thought this would be a simple decision.

Prior to the split, Baxter was providing me around $120-130 of forward dividends a year. Not bad with more than 3% yield. Post split, Baxter and Baxalta's combined forward dividends estimate is around $47. That's just over 1%.




It's a shame because both companies have good potential. However, looking at the dividend history of BAX, I estimate that it will take several years before I get back to the $120 income.

It's like a regular job. If your employer cuts your salary by 2/3, would you leave?

Here are the details:

3/2/2015     Buy       BAX    69.36    25         1740.95
4/1/2015     ReinvDiv  BAX    68.49315            0.18   
5/13/2015    Buy       BAX    68.24    25         1712.95
7/1/2015     ReinvDiv  BAX    69.93569            0.37   
7/7/2015     ShrsIn    BXLT   50.1898  
8/6/2015     Sell      BAX    42       50.1898    2107.97
8/6/2015     Sell      BXLT   37.89    50.1898    1901.69

I still made over $500 (close to 15% ROI before taxes) from the transactions, but I was sad to sell. It's like cutting off a limb of a tree providing you fruits.

Of course, it all depends on your strategy. If you like capital appreciation then BAX or especially BXLT may be your cup of tea, now that they are a takeover target.

For me, I can't read tea leaves. Even the forward EPS data is murky. Therefore, there's a lot of speculation.

Only the dividends give me an indication of what's going on. Basically, management at BAX decided to start afresh. They essentially zapped the previous dividend yield and aligned it with a predetermined payout ratio. BXLT's low dividend yield is way below my threshold to buy a company. Plus, there's a lot of uncertainty due to all the takeover, buyouts etc.

I could have waited it out. My other investments can carry the load (which is why diversification is important). If there are no opportunities out there, this what what I would do. However, there are some good quality companies on sale in August.

I could have also dumped only one. However, it's difficult to guess.

Always tough to sell. Not a simple decision. Moving on.....

Anyway, I do like the fundamentals of Baxter - a least prior to the merger). I will revisit both companies when the yield (and growth)  becomes appealing again, assuming the fundamentals are still in place.

What did you do with BAX and BXLT?

D4s

Image credit: Stuart Miles@FreeDigitalPhotos.net

4 comments:

  1. Same thought process here... I still own my BAX, but as you know, I sold my BXLT. BAX is coming soon though. It is too bad, I really liked Baxter. Looking forward to seeing what you buy next. You are dead on, there are so many options right now!

    -Adam

    ReplyDelete
  2. Adam,
    Sad to sell but ultimately, I am dealing with a dividend cut that didn't need to happen. I plan to average down my existing positions with the extra capital. Some bargains today.
    Thanks for visiting.
    D4s

    ReplyDelete
  3. Thanks for sharing. I have a relatively small position in both and was thinking of selling. The only reason I haven't yet is that I want to gain more exposure in the healthcare space. I'm tempted to sell and take advantage of some cheap energy names.

    Cheers

    ReplyDelete
  4. AAI, Thanks for visiting!
    I was contemplating holding since my other companies can still maintain a 3% yield for the overall portfolio. I also wanted to grow my heath care sector. Anyway, let's see how this goes.
    D4s

    ReplyDelete