3 powerful reasons to desire GlaxoSmithKline plc right now

Bilaal Mohamed gives investors three good reasons to consider high-yielding pharmaceuticals giant GlaxoSmithKline plc (LON:GSK).

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.

When it comes to investing, capital preservation can be just as important, if not more important than making profits. With careful money management and diversification, investors can afford to make a few mistakes in their stock-picking endeavours and still live to fight another day.


On the other hand, a careless gung-ho approach can indeed lead to unimaginable riches, but more often-than-not leads to complete financial ruin. Unfortunately with this approach, and without any money left to spend, reckless investors might not get a second chance. That’s why many people, particularly those who are new to investing, like to tread carefully and buy into what they know and understand. Defensive sectors such as consumer goods, utilities and pharmaceuticals fall into this category.

Risk-averse investors often like to park their hard-earned cash in stocks that won’t be affected by the economic cycle or political turmoil. Let’s face it, unforeseen events such as Brexit, or Donald Trump’s election win may have shaken equity markets and the currency markets, but our requirement for detergents, washing-up liquid, water, and medicines remains unshaken.

Ageing populations

One of the companies popular with such investors is GlaxoSmithKline (LSE: GSK). This FTSE 100 pharmaceuticals giant sits at the heart of many portfolios, thanks to its capacity to generate enormous profits each year, and distribute a large chunk of those proceeds to its loyal army of shareholders. For example, this year’s forecast dividend payout of 80p per share equates to a healthy yield of 5.2% at current levels, and that folks is the first and foremost reason to hold the company’s shares.

As I mentioned earlier, people will always need medicines, no matter what the political and economic climate. In fact, with ageing populations and developing nations now spending more than ever on healthcare, I believe the demand for Glaxo’s products should rise steady over the coming years. These defensive characteristics give the company a low risk profile, which would be my second reason to hold the shares.

Healthy pipeline

Finally, we come to my third and perhaps-less-obvious reason to buy a slice of this blue-chip drugmaker, and that is growth. Sales of new drugs have been very encouraging in recent years, and with many more in the pipeline, I believe that Glaxo’s future prospects look very healthy indeed.

Last month’s first quarter results revealed a 19% rise in revenues to £7.4bn, up 5% on a constant currency basis. Most encouraging was the fact that sales growth was achieved in all three of its main businesses, namely Pharmaceuticals, Vaccines, and Consumer Healthcare. Furthermore, with a continued focus on cost reduction, the group also reported improved operating margins and significantly better operating and free cash flows.

With generous levels of dividend income and an undemanding P/E rating of 14, I believe there are few better ways for risk-averse investors to generate a 5% return on their savings.

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.

Bilaal Mohamed has no position in any 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

Jumbo jet preparing to take off on a runway at sunset
Investing Articles

Down 70%+ since 2020, is IAG’s share price an unmissable bargain?

IAG’s share price is still down around 73% from its pre-Covid level, but with the business performing well last year,…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

£17,000 of shares in the FTSE 100 dividend giant can make me £18,874 every year in passive income!

This FTSE 100 dividend superstar has an 8.8% yield with dividends projected to rise. It looks very undervalued to me…

Read more »

Investing Articles

2 top UK growth stocks I’m buying for my Stocks and Shares ISA in July

Looking for UK-listed growth firms to add to a Stocks and Shares ISA? Our writer highlights two he's planning to…

Read more »

artificial intelligence investing algorithms
Investing Articles

This overvalued growth stock makes Nvidia look cheap!

ARM Holdings is a growth stock that’s benefitted from the AI rally. Muhammad Cheema takes a look at whether this…

Read more »

Investing Articles

1 penny stock I’d buy today while it’s 63p

This penny stock's down 70% since last March, yet could be set for a big comeback as the firm rebuilds…

Read more »

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

Buying 8,617 Legal & General shares would give me a stunning income of £1,840 a year

Legal & General shares offer one of the highest dividend yields on the entire FTSE 100. Harvey Jones wants to…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

£25k to invest? Here’s how I’d try to turn that into a second income of £12,578 a year!

If Harvey Jones had a lump sum to invest today he'd go flat out buying top FTSE 100 second income…

Read more »

Union Jack flag in a castle shaped sandcastle on a beautiful beach in brilliant sunshine
Investing Articles

2 lesser-known dividend stocks to consider this summer

Summer is here and global markets could be heading for a period of subdued trading. But our writer thinks there…

Read more »