I’ve been investing in shares since I turned 18 in 1986. Over decades, I’ve bought shares in dozens — perhaps hundreds — of companies. But my family’s longest-held holding is in biopharma giant GSK (LSE: GSK) shares.
We’ve owned GSK shares for decades
After graduating in the 1980s, my future wife worked for GSK for almost 32 years. Being bright, hard-working, organised, and disciplined, she rose through the ranks. As she did this, Mrs D was rewarded with share-based awards.
Also, she took full advantage of various share plans, investing the maximum into Save As You Earn (SAYE), Share Incentive Plans (SIPs), etc. By the mid-1990s, her GSK holdings were worth more than our modest London home.
When Mrs D joined GSK, the business was worth around £5bn. When she left, it had grown to £80bn. During our journey together, I also owned this stock for many years.
As life went on, my wife sometimes sold stock to pay for major outlays. Yet she kept much of her personal wealth in GSK shares. Then her employer gave her enhanced redundancy and early retirement in April 2021.
Selling up and moving on
When my wife left GSK 2½ years ago, she’d never bought even a single share in any listed business. All her company shares came through her employer, either free or discounted. By then, she’d amassed a huge holding.
When she departed, Mrs D faced a tough choice. Make a clean break of it by selling her stock as she left? Or hold tight for future GSK dividends and capital gains? (This is a crucial question for every investor in every stock ever, to be fair!)
One thing tipped the balance in favour of selling. As part of her severance package, GSK would pay all taxes due on her share sales. Given my wife’s marginal tax rate exceeds 40%, this made selling shares a no-brainer. Hence, she dumped the bulk of her stock, tax-free.
This left my wife with some tax-free shares delivered later via savings schemes, plus my own smaller holding. She then sold most of this rump holding in the 2021/22 tax year.
We still own GSK today
To answer my title’s question, it certainly wasn’t a big mistake to sell out in 2021/22. The tax benefits made selling at that time perfect sense. After all, why not boost her returns by getting a one-off tax credit from her ex-employer?
Another factor is that the yearly capital gains tax (CGT) allowance has been halved from £12,000 to £6,000 from this tax year onwards. This will mean paying more CGT in future, so our historic sale makes even more sense in hindsight.
We are left with a modest GSK shareholding, worth perhaps five figures. Yet, I like the stock today. At 1,528.6p, the shares trade on a multiple of around 11 times earnings, for an earning yield of 9%. Also, the dividend of 4.7% a year is covered over 1.9 times by earnings.
GSK shares are up 18% over one year, but down 1.5% over five years, excluding dividends. Today, this business is worth £62.6bn (following the spin-off of its consumer healthcare arm in July 2022). Hence, Mrs. D and I will hang onto our legacy holding — for now, at least.
