In its third quarter results of 2024, pharmaceutical giant, Glaxo Smith Kline, confirmed it would pay a quarterly dividend of 15p.
The business expects to pay out a full year dividend of 60p due to its total sales reaching £8 billion.
However, Morningstar believes that GSK’s dividends historically have been a bit too high.
Over the past five years, GSK has paid out a dividend at roughly 70% of normalized earnings.
This may have reduced the firm’s ability to reinvest in the company through internal R&D and external acquisitions of new drugs.
However, in its Q3 report, GSK said it made good progress in R&D, with regulatory approvals and high rates of efficacy of its new drugs.
Sales of its specialty medicines grew 19% year on year. Performance was strong across therapeutic areas, with HIV growing 12%, respiratory and immunology growing 14%, and oncology growing by 94%.
Yet, the business saw the sales of vaccines decline 15% year on year driven by a drop in sales for its Shingles’ vaccine and a decline of 72% for sales in its Arexvy drug which combats respiratory tract disease.
GSK’s share price is trading at £13.74 below Morningstar’s Fair Value Estimate of £22.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
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