BAXTER INTERNATIONAL INC. $39 - New York symbol BAX

BAXTER INTERNATIONAL INC. $39 (New York symbol BAX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 544.3 million; Market cap: $21.2 billion; Price-to-sales ratio: 1.3; Dividend yield: 1.2%; TSINetwork Rating: Average; www.baxter.com) makes a variety of medical devices, such as intravenous pumps and kidney-dialysis equipment. Hospital products supply 60% of its revenue; the remaining 40% comes from renal (kidney disease) equipment.

On July 1, 2015, the company spun off Baxalta, a maker of vaccines and other drugs. Investors received one Baxalta share as a tax-deferred dividend for every Baxter share they held.

Baxter still owns 19.5% of Baxalta; it plans to sell or distribute these shares within five years. As a separate firm, Baxter expects its research costs to fall from 6% of revenue to less than 5.5%.

But it still plans to launch over 50 new products over the next five years. By 2025, this gear should supply over 20% of its revenue.

The company will probably earn $1.33 a share in 2015, and the stock trades at 29.3 times that estimate. That’s reasonable in light of Baxter’s high market share and upcoming new products. The new annual dividend rate of $0.46 a share yields 1.2%.

Baxter is a buy.

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