The Motley Fool

GSK: five reasons I’d buy the shares today

Image source: Getty Images.

The performance of GlaxoSmithKline (LSE: GSK) shares has been a little disappointing in recent years. For example, over the last decade, the stock has delivered a total return (share price gains plus dividends) of around 6.4%, which is significantly below the FTSE 100’s total return of 9.1% in that time.

However, if you’re thinking about buying GSK shares, I wouldn’t let this past performance put you off. Here’s a look at five reasons I think Glaxo is a good stock to own today.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Consumer healthcare joint venture

One reason I’m bullish on GSK right now is that back in December, the group announced that it had reached an agreement with Pfizer to combine their consumer health businesses. I see this as a positive development.

The combination will bring together two highly-complementary portfolios of trusted consumer health brands – including GSK’s Sensodyne, Aquafresh and Zovirax, and Pfizer’s Advil, Centrum and Caltrate – which will make it a market leader across pain relief, digestive health, and therapeutic oral health with sales of nearly £10bn and a market share of over 7%.

GSK believes the joint venture will help deliver stronger sales, cash flow, and earnings growth and also generate substantial cost synergies, so that has to be a good thing.

Ageing population

Another reason I see appeal in the stock right now is the long-term growth story associated with the world’s ageing population. As people age, their demand for healthcare products and services tends to increase. As a healthcare specialist that owns an impressive portfolio of trusted consumer healthcare brands such as Panadol, Voltaren, and Fenbid (a painkiller sold in China), the group looks well placed to benefit as the global population continues to age.

Defensive nature

I also like the defensive nature of GlaxoSmithKline shares. Healthcare is less correlated to the economy than other industries (people still spend on health during a downturn) meaning that if we do see a global recession in the near term, GSK shares could outperform. Furthermore, with a globally diversified revenue stream, the stock also offers protection from Brexit uncertainty.

Big dividend

Of course, it’s hard to write an article on GSK without mentioning the dividend as for many investors, the stock’s yield is one of its biggest attractions. Now, I’ll point out that GSK isn’t the ‘perfect’ dividend stock. This is due to the fact that the payout hasn’t risen since 2015, which is a little disappointing. However, the yield of 5.2% is still highly attractive in today’s low-interest-rate environment.


Finally, GSK’s valuation seems quite reasonable to me. With analysts expecting GSK to generate earnings per share of 114.5p for FY2019, the shares currently trade on a P/E ratio of just 13.7. I think that’s a fair price to pay for a slice of this global business.

Putting this all together, I see considerable appeal in GlaxoSmithKline shares right now. With a market-leading consumer healthcare joint venture and a durable growth story associated with the world’s ageing population, I believe the stock is an excellent long-term ‘buy.’

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Edward Sheldon owns shares in GlaxoSmithKline. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.