Is this FTSE 100 dividend stock a ‘best buy’ in this stock market crash?

This FTSE 100 pharmaceuticals ace has dived over the past few weeks. But Royston Wild explains why it remains a top pick for long-term investors.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Friday trading was a much more calmer experience for stock pickers than earlier in the week. But don’t expect it to last. A spike in coronavirus infection rates over the weekend could cause stock bourses to plummet again on Monday morning.

In a recent piece I explained why National Grid’s role as the country’s sole power network operator makes it a top FTSE 100 safe haven to load up on today. But in truth Britain’s blue chip index is chock-full of defensive stars like this. Another such share that I think is a top buy for these troubled times is GlaxoSmithKline (LSE: GSK).

Marvellous medicines

Medicines, like food, running water, and a roof over our heads, is something that we expect in a modern society. Indeed, sales for big pharma companies tend to perform more resolutely in times of social, economic, or political crises like this. The panic selling of shares like Glaxo, then – a business which has lost 13% of its value during the past month – provides a terrific dip buying opportunity.

It’s not just that demand for the Footsie firm’s prescription treatments hold up well despite the Covid-19 outbreak. The rate at which consumer healthcare products are booming across the globe will help protect Glaxo’s bottom line, too. It hopes to spin this division off into a separate company soon, but for the time being the unit creates almost a third of turnover at group level.

Rising infection rates and panicked stockpile-building the world are driving demand for such products. As such, labels like Glaxo’s Panadol and Excedrin painkillers, Otrivin nose unblockers, and Theraflu flu-symptom battlers are likely to be booming right now, too.

But don’t be fooled!

There’s no reason why sales growth (which came in at 10% in 2019) should take a whack following the Covid-19 outbreak then. As I say, income from some of its products could have well received a significant boost more recently. But contrary to some thinking, it’s unlikely that its involvement to create a coronavirus vaccine will supercharge profits.

It’s not just that successfully developing a vaccine with one its partners will prove extremely challenging. Even if it does manage this, the boost to earnings are unlikely to be stratospheric. Buy the business, sure, but not on the back of a possible coronavirus  breakthrough.

Too cheap to miss?

It has to be said that the medical mammoth hasn’t got 2020 off to a flyer. Its share price was already falling before the coronavirus outbreak worsened in late February, reflecting in large part disappointing financials early last month. City analysts are expecting annual earnings at Glaxo to slip 7% in 2020.

I reckon its slipping stock price provides long-term investors an opportunity to nip in and grab a bargain, though. Right now the company carries a forward price-to-earnings (P/E) ratio of 12.5 times. Meanwhile, with brokers anticipating another 80p per share dividend in 2020 it sports a mighty 5.6% dividend yield, too.

If you’re looking for lifeboats during a bleak period for the global economy, this is one FTSE 100 share I think you should buy today.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »