Should You Buy BP plc And GlaxoSmithKline plc For Your Income Portfolio?

BP plc (LON:BP) and GlaxoSmithKline plc (LON:GSK) fall under this Fool’s scrutiny.

| More on:

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.

In years gone by, BP (LSE: BP) and GlaxoSmithKline (LSE: GSK) would have been automatic inclusions to income-seeking portfolios. The two companies are FTSE heavyweights, the 5th and 6th biggest companies listed on the London Stock Exchange respectively. Recent share price weakness has moved the yields on both shares north of 6%, and both companies should be seriously considered for high-yielding portfolios. 

BP

Shares in BP have been under pressure recently due to the latest commodity sell-off. Currently they yield a huge 7.91% due to the tough industry environment that the company operates in. This high yield is backed up by an expected 2015 dividend cover of 0.88 and a divestment strategy aimed at selling over $10 billion worth of non-core assets. In its most recent quarterly results (Q2), BP had operating cashflows of $6.3 billion and over $33 billion of cash and short-term investments on the balance sheet. This is a strong cash-generating business that can afford to keep the dividend well into the future, even at a $50 oil price. This could be an especially good time to buy BP shares, too, as buying now will lock in the 7.91% yield, even if oil prices continue to recover and BP shares rise up to the 400-500p level. 

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

GlaxoSmithKline

Although in a completely different sector to BP, GlaxoSmithKline shares have also been under pressure recently and its shares are down over 350p since year-highs in May. Currently the company has a yield of 6.32% and a dividend cover of 0.83, not much different to that of BP. Many financial analysts would say that GlaxoSmithKline’s yield will be slashed in the next year but, like BP, they are a heavily cash-generative business and can afford the dividend. The really exciting part of the company is that of pipeline of over 200 new drugs and treatments, the company expect half of them will hit the market in the next five years and will boost company earnings. This pipeline of new products is what attracts investors to pharmaceutical stocks and can send their stock prices through the roof. AstraZeneca (LSE: AZN), another FTSE 100 stock yielding over 4%, was subject to much takeover speculation and eventually takeover offer due to its pipeline of new drugs. This growth potential backed up by a strong dividend is what makes GlaxoSmithKline so attractive to investors. 

Even if BP and GlaxoSmithKline cut their dividends, they would still be among the top 20 yielding stocks in the FTSE 100 and both have better growth prospects than many, in my opinion.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Jack Dingwall has no position in any shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Happy woman with excess weight smiling and dancing alone in sports clothes
Investing Articles

Top British growth stocks for May

We asked our freelance writers to share the top growth stocks they’d buy in May, which included miners and musical…

Read more »

Electric cars charging at a charging station
Investing Articles

A cheap UK share I’d buy for the electric vehicle revolution

This cheap UK share has collapsed in value since I bought last year. But here's why I'm thinking of buying…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

3 distressed stocks with huge potential that I’m considering for my portfolio!

These three distressed stocks have performed badly in 2022, but that doesn't mean they won't recover. Here's why I'm considering…

Read more »

Luxury inside of NIO car
Investing Articles

Here’s why I’ve just bought NIO shares!

I've recently bought NIO shares, despite the stock being down nearly 80% over the past year. Here's why!

Read more »

Mature people enjoying time together during road trip
Investing Articles

Is now the time to buy Tesla shares?

Tesla's share price has fallen in 2022 and so has its valuation. Edward Sheldon looks at whether this is a…

Read more »

A graph made of neon tubes in a room
Investing Articles

Are Woodbois shares worth me buying at 4.7p?

Jon Smith considers the recent surge in price for Woodbois shares, and wonders if the move lower last week represents…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

How I’d generate a passive income for life with just £20 a week

Dividend shares can be an excellent way to earn a passive income for life. Our writer discusses a plan to…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

Hargreaves Lansdown investors are buying these cheap FTSE 100 shares. Should I?

Paul Summers takes a closer look at two cheap FTSE 100 stocks that were proving very popular with investors last…

Read more »