GlaxoSmithKline plc (ADR) (GSK): A Look At Its Dividend History

On top of steady dividend growth, GlaxoSmithKline plc (ADR) (NYSE:GSK)’s ability to throw up plenty of cash — net inflows rose to 1.4 billion pounds in quarter one from 1.1 billion pounds in the corresponding period last year — is also funding the company’s hefty share repurchase program. The firm has targeted between 1 billion pounds and 2 billion pounds of buybacks during the current year.

How does GlaxoSmithKline’s dividend prospects rate against the competition?

Source: Digital Look.

GlaxoSmithKline, which currently trades on a forward P/E reading of 14.2, beats its FTSE 100 counterparts on both value and dividend yield. It is also far more appealing than its pharma rivals, particularly in terms of price rating, although the forwards earnings multiple on show here are skewed by a scattering of firms.

A more accurate comparison would be with AstraZeneca plc (ADR) (NYSE:AZN), which changes hands on a forward multiple of 9.9 and is expected to yield 5.4% in 2013. However, the expiration of a number of its patents are anticipated to crimp earnings over the next two years, which could have huge ramifications on dividend growth moving forwards.

To conclude, I believe that GlaxoSmithKline plc (ADR) (NYSE:GSK) is a solid pick for income investors. The firm’s ability to grow dividends at a decent rate, even in times of eroding earnings, makes it a comforting bet for shareholder looking forward to steady payout increases. And I reckon that an improving earnings outlook should drive yields further ahead of those of its peers in the FTSE 100 and pharmaceutical sectors.

The article A Closer Look at GlaxoSmithKline’s Dividend Potential originally appeared on Fool.com is written by Royston Wild.

Fool contributor Royston Wild has no position in any stocks mentioned. The Motley Fool recommends GlaxoSmithKline.

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