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£5k to invest? I think the GlaxoSmithKline share price is the best income stock in the FTSE 100

After several years of falling revenues and profits, 2019 is turning out to be a fantastic year for GlaxoSmithKline (LSE: GSK).

Over the past 11 months, the company has raised its full-year earnings outlook not once, but twice, off the back of robust sales of its shingles vaccine and a strong overall performance in its consumer health and vaccine businesses.

Following better-than-expected performances, the company now anticipates earnings per share will remain unchanged this year. Management had previously planned to report a decline of between -3% and -5% in earnings for 2019.

The fact Glaxo’s full-year outlook has changed so dramatically over the past 11 months is impressive. But what gets me excited is the company’s long-term potential.

Investing for the future

Over the past year or so, Glaxo has devoted a great deal of time and effort to its oncology treatments. Previous management’s decision to sell much of the company’s cancer portfolio to peer Novartis in 2014 was widely considered to be a big mistake by City analysts. Ever since, the firm has been trying to rebuild its presence in the cancer treatment market.

Glaxo has been concentrating on the development of three primary treatments in its cancer portfolio this year. These include Dostarlimab, to treat advanced or recurrent endometrial cancer, Zejula for advanced ovarian cancer, and Belantamab for blood cancer.

So far, progress has been good on all fronts, so I’m excited to see what the next 12 months hold for these products. Dostarlimab, in particular, is on track to receive regulatory approval by the end of 2019.

And it’s not just Glaxo’s cancer business that has exciting prospects. Soon after CEO Emma Walmsley joined, she promised to end its tendency to drift into “hobbyland” and develop drugs that have no apparent commercial benefit.

Considering Glaxo’s performance over the past year, both in terms of drug development and earnings, it looks as if she’s on the right track.

Dividend growth

If Glaxo continues to focus on its most promising treatment, then I think the only way is up from here. For dividend investors, this is excellent news.

For the past five years, Glaxo has held its payout at 80p per share per year, as earnings have come under pressure. With sales and profits set to start growing again, there’s a good chance management could increase the distribution for the first time since 2014 in the next two or three years.

At the time of writing, the stock supports a dividend yield of 4.6% and trades at a forward P/E of 14.4.

The bottom line

So that’s why I think the GlaxoSmithKline share price is the best income stocks in the FTSE 100. Not only does it offer a market-beating dividend yield of 4.6% at the time of writing, but this dividend is backed by a defensive income stream from pharmaceutical sales.

On top of this, the company has an exciting pipeline of new treatments that could help push the distribution higher in the years ahead.

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Rupert Hargreaves owns no share mentioned. 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.