) recently announced a quarterly dividend of 45 cents per share,
payable as of October 1, 2012, to stockholders of record at the
close on September 7, 2012. The new dividend constitutes a yearly
dividend of $1.80 per share, up over 34% from the prior annual
dividend of $1.34. Baxter's payout correspondingly goes up to about
40% from approximately 30% earlier.
Baxter also announced a fresh share buyback authorization of up
to $2 billion of its common stock. It has about $450 million
remaining from its earlier program approved in December 2010. The
company will repurchase shares from the open market as per its
Baxter enjoys robust cash flow and it has returned notable funds
to shareholders by way of share repurchases and dividends. The
company has generated average annual cash flow of $2.7 billion in
the past 5 years. It has returned over $11.4 billion in aggregate
to its stockholders by way of share repurchases and
Baxter, in November 2011, completed its acquisition of Baxa
Corporation. The takeover highlights the company's continued
commitment toward patient safety and nutrition. It also permits
Baxter to provide a wider set of solutions for the safe preparation
and delivery of IV medication. Baxa's know-how will benefit
patients across the globe.
Moreover, Baxter struck a deal, in December 2011, to buy Synovis
Life Technologies, a well-known provider of mechanical and
biological products for the repair of soft tissue in a large number
of surgical operations. The acquisition will further expand
Baxter's offerings in the area of biosurgery and regenerative
treatment. The takeover of Synovis was completed in the first
quarter of 2012.
On the flip side, despite resilience in Plasma Proteins and
Antibody Therapy sub-segments, we are concerned about relative
stagnation in sales, a slightly somber outlook for hospital
spending and tightening of reimbursement. We also account for the
unfavorable impact of foreign exchange translation and possible
dilution associated with the company's acquisitions of Baxa and
Improved execution has lifted sentiment somewhat toward Baxter.
It is a good bet for value investors willing to wait as
fundamentals improve further. Among others, the company competes
Becton, Dickinson and Company
) in certain niches. We currently have a Neutral long-term
recommendation on Baxter. The stock currently retains a Zacks #3
Rank, which translates into a short-term Hold rating.
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