Recent Purchase – GSK

GSK was one of my stocks I had mentioned in my August watch list. The stock has been trading around its 52 week low for most of the month. The stock took quite a hit in July due to poor results. The company was also linked to some scandal in China with respect to bribery allegations. 

But the company has a great stable product line and several potential medicines in the pipeline. Also, I don’t have any exposure to the pharmaceutical sector. I purchased 30 shares at $49.00 on 8/29/2014. With commission, the total cost comes to $1,477.00. The quarterly dividend is not consistent probably due to currency fluctuations. Google Finance currently shows the quarterly dividend to be $0.65. This results in a yield of 5.31% and the purchase roughly adds about $77.70 to my forward annual dividends. Unfortunately, due to the ex-dividend dates and payment dates of the stock, I won’t be getting a dividend from GSK this year. This purchase was made in my IRA and hence this being an ADR shouldn’t have any impacts.

The company has not been able to consistently grow its revenue during the past few years and has dipped or remained flat more often than not. The stock currently has a P/E ratio of 15.3 compared to its 5 year average of 19.1. The company has also been buying back some stock for the past few years, though it is much less than what I would like. the outstanding share count has reduced by about 5% in the last 5 years. That’s the overall decrease, not an annual decrease.

Morningstar has a fair value of $51.00 for the stock and it is rated 3 stars.

With all these issues, the stock is a little risky investment. But given that I don’t have an exposure to this sector and the fact that the stock is yielding over 5%, I believe this is worth the risk. Let’s see how this plays out.

The portfolio page has been updated to reflect this purchase.

Disclosure: Long GSK

Image courtesy: gsk.com

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6 thoughts on “Recent Purchase – GSK

  1. Hi DGJ,
    Congrats on the purchase!
    I can’t offer much about GSK as I’ve not researched the stock. But I remember them from the UK as Smith Kline Beecham and they have some strong consumer product brands such as Night Nurse (flu remedy), Aquafresh / Sensodyne toothpaste, Tums / Settlers, Nicorette gum, and Horlicks among others.

    Best wishes!
    -DL

    • Thanks DL. Like I mentioned this is my first position in the pharma sector and also an ADR. I personally use/used lot of the brands from GSK and hence I hope the company is able to turnaround and make consistent profits.

      Thanks for stopping by.

      DGJ

  2. Great purchase DGJ! I am a fellow GSK shareholder as well. While the company has been down recently, I am confident in the ability to rebound in the long run. Very solid company with a history of growing its dividend. Based on yield, market cap, and the fact it is such a major player in the industry I felt this was the best way to get into the crowded pharm industry. The one thing that drives me nuts is the lag time between the ex-date and the payment of the dividend. I want my dividend now! I don’t want to wait two months for it. Hopefully the stock stays down until October 2nd.

    Bert, one of the dividend Diplomats

    • Hi Bert,
      The lag time is really bad… close to 2 months is definitely not acceptable in this day and age. That’s the reason I won’t be getting any dividends this year from GSK. Glad to be a fellow shareholder.

      Thanks for stopping by.
      DGJ

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