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