Of all the 100 different stocks in the FTSE 100, I think the GSK (LSE: GSK) share price has more potential to help you retire early than most.
It all comes down to the company’s defensive nature.
GSK share price growth
Healthcare is one of the world’s most defensive markets. The treatments and products produced by GSK will always be required, and as the population grows, so will demand.
But there’s more to GSK that its existing portfolio of drugs and medications. The company also spends billions of pounds every year researching new treatments. These products are designed to combat existing diseases and viruses, as well as new threats. The group is always trying to think of new ways to treat old problems and to address new issues.
Management also considers acquisitions regularly. These efforts should help the company maintain its edge in the global pharmaceutical industry, not just in the short term, but in the long run as well.
This is the primary reason why the GSK share price could make an excellent buy-and-forget investment. Its products will always be in demand, and demand will only grow over the long run. That means to a certain extent the business runs itself.
The company’s consumer pharmaceuticals division is another positive factor. Management is planning to spin off this business in the near term, which could create a windfall for shareholders. A special dividend or shares in the business may be distributed to existing GSK share price holders.
Income returns
It’s also good news for income seekers. GSK’s defensive business model means that the company has a relatively stable and predictable income stream from operations. This supports an attractive dividend yield on the GSK share price.
Indeed, over the past few months, many FTSE 100 businesses have been forced to cut or eliminate their dividends to conserve cash in the coronavirus crisis. GSK is one of the few companies in the index that has not taken this course of action.
As a result, at the time of writing the stock supports a dividend yield of 4.9%, above the FTSE 100 average of around 4%. This looks set to continue as the dividend is well covered by earnings per share. The dividend cover stands at 1.5.
Retire early
All of the above suggests that the GSK share price may be an excellent buy for any investor’s retirement portfolio.
Over the long term, earnings per share should grow at least in line with inflation. That implies the company can achieve long-run earnings growth of 3% or more. Coupled with its 4.9% dividend yield, these numbers infer that the stock can produce total returns of 7.9% in the long term.
This rate of return is more than enough to help you grow your financial nest egg. According to my calculations, an investment of £200 a month growing at a rate of 7.9% per annum could grow to be worth as much as £300,000 after 30 years.
