The Baxter Deception

A popular holding among Dividend or Dividend Growth Investors (DGI) has been Baxter (BAX).  Over the years it has been prolific in developing and spinning off companies.  Some of its offspring include Allegiance (Cardinal Health), Care-Mark (CVS) and Edwards Life Sciences.  This month, Baxalta (BXLT) was added to this list.

There has been some discussion within the DGI community regarding Baxter’s post spinoff status.  Some chose to sell their stock due to management’s lack of clarity surrounding the future dividend.  Others (myself included) took a wait and see approach.

This week on Tuesday and Wednesday, management finally answered question.  BXLT will pay a $.07 dividend per quarter.  And … drum roll please … BAX will pay $.115 per quarter!  But wait a minute … pre spinoff the quarterly rate was $.52.  Now it’s less than half?

Some like Ryan consider this the price to pay to participate in Baxter’s incubator and you have to be looking for the concept of Total Return rather than Dividend Growth.  Others, being DGI purists, will be selling if they haven’t already due to the dividend cut.

I consider Baxter’s lack of clarity to be deceptive at best.  Recent spinoffs in which I’ve participated maintained the parent company’s dividend.  KMB and ADP both maintained while CDK (ADP) subsequently began paying a dividend of their own (HYH has not (KMB)).

Therefore my decision is to place Baxter in the Penalty Box, joining the likes of Orchids Paper and First Niagara until such time as they redeem themselves or are sold.

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The Cuba Issue

Well this blog is starting to gain a little traction.  I’m working on function first over form so my goal on fully functional is the end of July.

A topic of interest this week is how to invest in Cuba (as a US investor).  There appears to be action afoot to insert some cracks into the 50+ year wall of blockade.  These openings, however, are being created by presidential action which means they could be fleeting (i.e. valid until the next  election), targeted (medical, agricultural or tourist related), and/or limited as executive orders generally can’t override the law.  In this case, applicable law is known as 49/49.  This law generally says a U.S. person may make an investment in a non-Cuban foreign entity that engages in commercial dealings in or with Cuba if:

  1. the foreign entity is not controlled by U.S. persons; and
  2. a majority of the revenues of the foreign company are not derived from Cuba.

With this foundation and with the relative strength of the US dollar, my choice to play this action is through Canadian companies, notably banks.  Just keep in mind that to play in Cuba requires Foreign Exchange exposure today and an eye on potential implications based on foreign tax treaties.

Almost 2016

The good news is that I’ve made a little headway on this blog this week.

The bad news is I’m realizing how much further I’ve yet to go.

So to recap, I’ve placed most of my portfolio on the blog currently with percentages.  Excluded are positions used for covered calls (GE, T, SCHW, CPB, CSCO).

Many of the menu links are not yet functional – but at least there’s now a menu.

Time is certainly not standing still this year as 2015 is halfway gone.  It appears the second half will be interesting with Greece and Puerto Rico lurking in the shadows, the Fed still scratching its head on rates and energy a significant wild card.  But as always, there remain opportunities.  One possible theme being Canada and the US$ valuation.  Another still being US Regional Banks (I’m thinking there’s more room to run).

Be safe and enjoy the holiday.  And I’ll attempt to be more diligent with my posts and upgrades.