Saturday, 18 May 2013

A Look at Baxter International


I recently purchased 75 shares of Baxter International @ $71.03. Here’s how the numbers stack up.

Average Dividend Yield Analysis*

BAX:US
Year
High Price
Low Price
1Q
div.
2Q
div.
3Q
div.
4Q
div.
Annual Dividend
High Yield
Low Yield
2003
$31.32
$18.18




$0.582
3.20%
1.86%
2004
$34.84
$27.10




$0.582
2.15%
1.67%
2005
$41.07
$33.08




$0.582
1.76%
1.42%
2006
$48.54
$35.12




$0.582
1.66%
1.20%
2007
$61.09
$46.07
$0.582
$0.168
$0.168
$0.168
$1.09
2.36%
1.78%
2008
$71.53
$47.41
$0.218
$0.218
$0.218
$0.218
$0.87
1.84%
1.22%
2009
$60.99
$45.46
$0.26
$0.26
$0.26
$0.26
$1.04
2.29%
1.71%
2010
$61.88
$40.25
$0.29
$0.29
$0.29
$0.29
$1.16
2.88%
1.87%
2011
$62.50
$47.55
$0.31
$0.31
$0.31
$0.31
$1.24
2.61%
1.98%
2012
$68.91
$48.98
$0.335
$0.335
$0.335
$0.45
$1.46
2.97%
2.11%
2013


$0.45
$0.45
$0.49
$0.49
$1.88


2014


$0.49
$0.49
$0.49
$0.49
$1.96


Stock prices are per calendar year.

10y ave
2.37%
1.68%
Dividends are recorded in the quarter they were paid.

5y ave
2.52%
1.78%







3y ave
2.82%
1.99%







5y
$77.86
$110.18







3y
$69.50
$98.49






Super Cheap
$61.22


The table shows the 3 year average dividend yield to be 2.82% ((2.88% + 2.61% + 2.97%)/3). I use the numbers in the “High Yield” column for obvious reasons.

Using the current annual dividend of $1.96, one would have to pay $69.50 for a 2.82% dividend yield.

Buying the stock at its low in 2003 would have earned you an initial yield of 3.20%. Using the current annual dividend, that corresponds to a stock price of $61.21 today (see “super cheap” price in the table above).

Graham Price

BAX’s 2010, 2011 and 2012 EPS were $2.39, $3.88 and $4.18. 3Y Ave EPS = $3.48.
BAX’s BV is $12.83.
Graham Price = SQRT (3Y Ave EPS * BV * 22.5) = $31.71

Cyclically Adjusted Price to Earnings Ratio

BAX’s 10Y Ave EPS = $2.56
CAPE = Stock Price / 10Y Ave EPS = $92.30 / $3.95 = 28.5
A CAPE below 20 is good.

Conclusion

I made my decision to buy BAX based on the 5 and 3 year average dividend yield numbers.  However, Graham Price and CAPE indicate the stock is not a bargain.

BAX increased EPS from $1.53 in 2003 to $4.18 in 2012. That’s an increase of 2.7 times over 9 years. 2013 and 2014 EPS are estimated at $4.70 and $5.20, respectively.

You can also read Compounding Income's recent purchase of BAX.


*My method is not perfect as the stocks low price may have occurred before the annual dividend increase.

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