How Does GlaxoSmithKline plc (LON:GSK) Fare As A Dividend Stock?
Over the past 10 years GlaxoSmithKline plc (LSE:GSK) has returned an average of 5.00% per year from dividend payouts. The company currently pays out a dividend yield of 5.97% to shareholders, making it a relatively attractive dividend stock. Does GlaxoSmithKline tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. See our latest analysis for GlaxoSmithKline
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Is it paying an annual yield above 75% of dividend payers?
Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
Has it increased its dividend per share amount over the past?
Is it able to pay the current rate of dividends from its earnings?
Will it have the ability to keep paying its dividends going forward?
Does GlaxoSmithKline pass our checks?
GlaxoSmithKline has a trailing twelve-month payout ratio of 167.20%, meaning the dividend is not sufficiently covered by its earnings. In the near future, analysts are predicting a more sensible payout ratio of 69.94%, leading to a dividend yield of around 6.00%. Moreover, EPS should increase to £0.82, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. In the case of GSK it has increased its DPS from £0.53 to £0.8 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock. In terms of its peers, GlaxoSmithKline produces a yield of 5.97%, which is high for Pharmaceuticals stocks.
Next Steps:
Keeping in mind the dividend characteristics above, GlaxoSmithKline is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three key aspects you should further research:
1. Future Outlook: What are well-informed industry analysts predicting for GSK’s future growth? Take a look at our free research report of analyst consensus for GSK’s outlook.
2. Valuation: What is GSK worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether GSK is currently mispriced by the market.
3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
