There are plenty of strong dividend stocks in the FTSE 100 Index right now. The Footsie average dividend yield is sitting at 3.5% as I write on 19 May with some big-name shares offering compelling payouts to shareholders.
GSK (LSE: GSK) is one such company that has caught my eye. The multinational pharmaceutical giant has a forward dividend yield of 4.6% and regularly pays out a high percentage of its earnings to shareholders.
With that in mind, here are a couple of reasons why I think GSK is a dividend stock for investors to consider in 2025.
Recent performance
It hasn’t been all plain-sailing for the GSK share price in recent times. Despite climbing 2.6% in 2025 to £13.97 as I write, the company’s shares are still down 21.3% in the last 12 months.
There are a few factors at play here. A $2.2bn (£1.7bn) settlement over its heartburn medication drug, Zantac, in October last year weighed on the share price alongside falling vaccine sales.
However, 2025 got off to a strong start with growth in revenue and profits, largely driven by 17% growth in its specialty medicines segment sales in the first quarter. On a constant exchange rate (CER) basis, Q1 sales increased by 4% to £7.5bn while core operating profits climbed 5% to £2.5bn.
This positive start, combined with a history as a strong dividend payer and shareholder-friendly board, makes it a FTSE 100 stock worth a closer look by dividend investors, I feel.
Valuation
That said, GSK’s current price-to-earnings (P/E) ratio is 18.3 which is well above the Footsie average
Pharmaceuticals as a sector does tend to come with higher ratios than the market average. That’s because so much upfront investment is made in the potential cash cow drugs of tomorrow, so a lot of growth is baked into the current share prices of these companies.
With that in mind, GSK looks a touch undervalued to me. For example, fellow pharmaceuticals giant AstraZeneca has a P/E ratio of 27.4 as I write. This relative pricing against key peers is just another reason I think the stock is worth considering.
Looking at dividends, the company expects to pay a full-year distribution of 64p per share. That’s within its target payout ratio of 40% to 60% and represents a dividend yield of 4.6%.
My Verdict
I think GSK is worth further research. The positive earnings outlook and strong history as a dividend payer could provide a valuable foundation for future income.
From a personal standpoint, I’m happy with my current portfolio mix so I won’t be buying right now. There are risks to this thesis of course, with a P/E ratio well above the Footsie average in a sector with regulatory risk and significant upfront costs.
With a significant market cap of £57.3bn and a sector that tends to hold up well throughout the economic cycle, I like the long-term prospects of GSK. Those factors make the company one that I think income investors should be taking a closer look at in 2025.
