Wednesday, October 16, 2013

Dividend Compass Cup Match 8- Baxter vs Novo Nordisk

In the last match, Procter & Gamble beat out Unilever to advance in the Dividend Compass Cup.

This match in the healthcare division is between two heavyweights - Baxter and Novo Nordisk.

The Dividend Compass Cup rules are straightforward, we run the two quality, wide moat companies through the Dividend Compass to analyze which is the more interesting investing candidate. Todd Wenning's Dividend Compass scores them 1-5.

Baxter is a company that really understands R&D - share Repurchases and Dividends. From 656 million shares outstanding in 2006, Baxter has trimmed its share count down to 552 million today. Luckily from our perspective it has not done this at the expense of its dividend. Baxter has a steady track record of double digit dividend growth

Baxter metrics

Baxter's only cause for concern is its recent FCF cover, this is a high priority item for the Dividend Compass, but other than FCF cover and a good not great sales growth number its a sea of 5 point scores for Baxter. That will be tough to beat.

Baxter scores

Novo Nordisk has built a wide moat business through its diabetes treatments. Its operatin metrics show a company that is well run from all the key perspectives.

Novo Nordisk metrics
That is as good a set of numbers are you will see, acres of coverage, high growth and Return on Equity. The recent scores are all 5s

Novo Nordisk scores

And so in the last match of Round 1, we have a tie based on 5 year average. Both Baxter and Novo Nordisk come in at 4.86. These are two deserving companies, but we will hand the match to Baxter, Baxter's 3% forward yield is good enough to get the edge over Novo Nordisk's 1.3% yield

That's a wrap on round one and we look forward to round 2.

No comments:

Post a Comment