GSK (LSE:GSK) has re-emerged as one of the FTSE 100‘s more attractive dividend-paying shares.
Annual payouts were kept locked at 80p per share for years before toppling to 44p in 2022. But dividends have grown strongly since then, including a 5% hike to 61p last year.
City analysts are expecting cash rewards to keep rising through to 2026 too. Here are the forecasts:
| Year | Dividend per share | Dividend growth | Dividend yield |
|---|---|---|---|
| 2025 | 64.6p | 6% | 4.5% |
| 2026 | 69.7p | 8% | 4.9% |
Expectations of further dividend growth mean the yields on GSK’s shares soar above the FTSE 100 average of 3.5%. Yet dividends are never guaranteed. And as a dividend investor, I need to consider how realistic these estimates are before splashing the cash on its shares.
So what’s the verdict? And should I consider adding GSK to my portfolio?
Strong foundations
The first thing I’ll consider is how well predicted dividends are covered by expected earnings.
A figure of two times or more is desirable, as it provides a wide margin of safety in case of profits shocks. It also gives breathing room for the company to keep investing in its operations while paying a dividend.
On this front GSK scores very highly, with dividend cover standing at 2.6 times and 2.7 times for 2025 and 2026 respectively.
The next stage is to consider the firm’s balance sheet. A sturdy financial foundation’s particularly important for pharma companies, given the huge costs associated with product development.
Once again GSK looks good, with its net debt falling to £13.1bn at the end of 2024 from £15bn a year earlier. This results in a pretty manageable net-debt-to-core EBITDA ratio of around 1.2 times.
The firm’s decision to launch a £2bn share buyback programme also underlines the company’s robust financial health.
Bright outlook
On balance then, the dividend forecasts at GSK look rock solid. But predicted payouts for the next couple of years aren’t the only things on my mind as a possible investor. I also need to consider the company’s growth prospects, which will impact its share price performance (along with dividends) over the long term.
Owning pharma shares can sometimes be a tough pill to swallow, so to speak. Drug development costs can spike, and regulators can scotch planned product launches. Companies can also be hit with expensive litigation (GSK last year paid £1.8bn to settle legal cases over its Zantac heartburn treatment).
But on balance, things are looking sunny for GSK right now. This month it upgraded its 2031 sales target, saying it now expects revenues of £40bn versus a previous forecast of £38bn.
These forecasts are underpinned by strong recent late-stage testing results. In fact, with a strong track record of execution — and a packed pipeline of 71 drugs in the Specialty Medicines and Vaccines segments — things are looking good for the FTSE company for the next decade.
Supported by growing global healthcare demand, I think GSK shares are worth serious attention for both growth and income.
