The Next Stock You Should Consider: GlaxoSmithKline plc (ADR) (GSK)

Eli Lilly’s Stalled Dividend

Meanwhile, Eli Lilly reported full-year 2012 revenues declined 7% year over year and earnings of $3.66 per share.  Consequently, the stock now trades for a modest 15 times trailing earnings.  While Eli Lilly’s share price has performed very well recently, increasing more than 20% in 2012, the company hasn’t provided investors with a dividend increase in almost three years.  Because its stock price has risen so much over the last couple years, the yield is now down to 3.5% at recent prices.  Going forward, management hasn’t provided guidance as to when the company will resume increasing its payout.

As opposed to Lilly’s inability to raise its dividend, Glaxo’s management remains steadfast in their commitment to increasing its payout. The company declared a fourth-quarter dividend higher than its quarterly payout last year.  Glaxo’s four quarterly dividends in 2012 amounted to 74 pence versus 70 pence in 2011, an increase of more than 5% year over year.  Since Glaxo’s stock price leveled off (the stock actually ended 2012 down slightly), new investors will enjoy a yield of more than 5% annualized.

The Foolish Bottom Line

Glaxo doesn’t have the pipeline problems that Pfizer has and also has a more shareholder-friendly dividend policy than Eli Lilly.  While both Eli Lilly and Pfizer had great runs last year, their dividend yields now pale in comparison to Glaxo’s 5% yield.

Pharmaceutical companies like Glaxo provide products that customers can’t go without for very long.  In addition, the company offers an industry (and market) beating dividend yield.  To top it all off, the stock is trading for valuation multiples more attractive than the S&P 500.  The company has all the makings of a highly rewarding long-term holding.  Glaxo and its juicy dividend yield belong in many investors’ portfolios.

The article The Next Stock You Should Consider originally appeared on Fool.com and is written by Robert Ciura.

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