What’s happening with the GSK share price?

The GSK share price seems to be going nowhere ahead of the company’s big split. I do like GSK, but should I buy or should I wait?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Sometimes FTSE 100 companies get a bit bloated and something needs to be done. Insurer Aviva suffered that way and has been restructuring in recent years to become significantly leaner. GlaxoSmithKline (LSE: GSK), meanwhile, is adopting a different approach by splitting its business. But since we heard the news, the GSK share price has gone nowhere.

Why are investors showing so little interest? It could be something to do with Covid-19, and Glaxo’s absence from vaccine research. In the pharmaceuticals sector, the world did focus rather a lot on those developing vaccines, and maybe the rest just got forgotten. While GSK shares have floundered over the past two years, AstraZeneca, for example, has seen its stock climb by more than 30%.

I also wonder whether investors are seeing the planned split as an admission that the company’s focus on rebuilding its drug development pipeline hasn’t been enough. That effort has been going on for a few more years than many of us expected. For sure, I’d thought Glaxo would be back to getting its dividend growing long before now.

We’re still waiting

But here we are in 2021, and we’re still stuck on the firm’s perennial 80p dividend. And stuck with an underperforming GSK share price. Oh, and Glaxo intends to rebase its dividend at 45p from 2023 anyway, as part of its restructuring. My colleague from The Motley Fool, Ollie Henry, has covered the upcoming split in more detail. But there’s one key aspect that keeps me from buying GlaxoSmithKline stock today.

I like the pharmaceuticals business as a long-term investment. And I would definitely have New GSK on my list of top candidates in the sector. But the spun-off Consumer Healthcare business with its painkillers, toothpastes and the rest? I’m not so sure, especially if it ends up shouldering the bulk of GSK’s debt, as appears to be the plan.

I expect the Consumer Healthcare thing will end up doing ploddingly well, paying maybe a couple of percent in dividends per year. And it’s the kind of thing I might go for if I could see the full structure and finances of the company. But I would definitely not take the risks that go with the current unknowns for a stake in something so uninspiring.

New GSK share price

There are risks with New GSK and its pure drug development model too. After all, the disappointments of that pipeline rebuild will surely put off a lot of investors. And there’s no guarantee that Glaxo will create blockbuster drugs as of old. But I could still see myself investing in New GSK with a modest-but-dependable portfolio of products.

I’ll need to see its financial structure, though, and get a feel for the value of the New GSK share price before I’d hand over any of my investment cash. To sum up, I’m cautiously optimistic, but I’m going to wait. I’ve waited this long, so a while more should be fine.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft owns shares of Aviva. The Motley Fool UK 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.

More on Investing Articles

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »