Today marks the first sell in my dividend portfolio. As mentioned in my previous post, taxes are the prime reason I’m selling my Baxter (BAX) stock ahead of the spin-off.
Despite the effective dividend cut in the post spin-off situation I’m optimistic about the long-term prospects of Baxter and Baxalta but unfortunately the Belgian government still has a rule in place that investors need to pay 25% tax on most spin-off shares.
It doesn’t make a lot of sense as there’s no value gain when a company does a spin off but unfortunately that’s just the way things are. It’s probably no surprise that most Belgian investors avoid this tax by selling shares before a spin-off goes into effect.
In case of the South32 spin-off from BHP Billiton a couple of weeks ago I decided to keep my shares because South32 was a relatively small part of BHP Billiton and I estimated the cost of selling and then re-buying the shares after the spin-off would be more expensive than paying the tax.
The Baxalta spin-off from Baxter it’s quite different, Baxalta makes up nearly half of Baxter’s current market cap so the tax bill would be much higher than transactions costs.
As such, I just sold my 9 BAX shares for $70.96 a share . Maybe I’ll pick up BAX again in the near-future, I’m planning at least one more buy in the energy sector but after that I want to increase my exposure to consumer staples and healthcare.