Of all the shares listed in London, there’s one I check almost every trading day. That’s because I’ve owned shares in GlaxoSmithKline (LSE: GSK) for 30 years and more. Also, both my wife and her father worked for GSK for decades. In addition, GlaxoSmithKline is the biggest individual UK shareholding in our family portfolio, so the share price is important. For us, this pharmaceutical giant is like our family firm, as well as a FTSE 100 super-heavyweight.
The GlaxoSmithKline share price roller coaster
The past two years or so have been something of a roller-coaster ride for the GSK share price. At its pre-Covid-19 2020 peak, the stock hit a high of 1,857p on 24 January 2020. But as the coronavirus spread worldwide, global stock markets imploded. Along with the wider London market, Glaxo shares tanked in March 2020. They then regained some ground to close out 2020 at 1,342p. Alas, further price weakness ensured. At their 2021 low, the shares bottomed out at at 1,190.8p on 26 February — just over a year ago.
The next day, on 27 February 2021, I argued that this stock was a buy. With the Glaxo share price closing at 1,191p the previous Friday, I said, “I still see GSK as one of cheapest of cheap shares in the Footsie.” I also committed to buy more shares, which I did by reinvesting my juicy cash dividends.
GlaxoSmithKline bounces back hard
Fast-forward just under a year and things look much healthier for GSK shareholders. At its 2022 peak, the share price soared to an intra-day high of 1,737p on 17 January. This followed news of a huge £50bn bid for GSK Consumer Healthcare by consumer-goods giant Unilever. On Saturday, 15 January, I wrote about this surprise takeover approach. I predicted the share price would soar on Monday, which it duly did. However, when this mega-bid collapsed, the shares dropped back.
As I write, the Glaxo share price stands at 1,589.6p, valuing the group at just over £80bn. Right now, the shares trade on a price-to-earnings ratio of 18.4 and an earnings yield of 5.4%. The 80p-a-share dividend equates to a dividend yield of just above 5% a year. Today, these fundamentals don’t exactly scream value to me. So should I bite the bullet by selling my oldest and largest shareholding?
GlaxoSmithKline is undergoing ‘forced evolution’
Having been a ‘zombie stock’ for much of this century, the Glaxo share price has leapt by almost a quarter (+23.6%) over the past 12 months. It’s also up by 6.1% over six months, but down 3% over five years. So does it make sense for me to sell into recent price strength? The main reason that I’ve held onto my Glaxo stock for so long is the chunky dividend. But the full-year pay-out has not grown since 2015. For the past eight years, it’s been 80p a share, except for payments totalling 81p in 2015/16. This dividend stagnation is set to worsen, as the company plans to cut its dividend this year and next.
In addition, Glaxo will split into two separately listed companies in mid-2022. Also, leading scientist Dr Hal Barron (GSK’s chief scientific officer and president, R&D) is to leave the group. Thus, I have finally decided to sell some of my Glaxo stock. However, I must first track down my dusty old paper certificates before selling. Urgh, what a pain!
