Down 17% with a P/E of 9.4! Is this dividend star the best share to buy after recent good news?

Harvey Jones reckons this former FTSE 100 darling could be the best share for him to buy today given its low price and rising yield. Yet recent performance has been poor.

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Could the very best share to buy today be one I already hold? I certainly hope so, but there’s a mystery at the heart of this one.

The company in question is pharmaceutical giant GSK (LSE: GSK). In its former incarnation as GlaxoSmithKline, this was one of the most popular and admired FTSE 100 stocks of all.

It was a true Dividend Aristocrat, regularly yielding around 5.5% a year, while holding out the prospect of long-term share price growth too.

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No stock smashes it forever though. Glaxo hit blockages in its drugs pipeline as it struggled to replace blockbuster treatments that had gone off patent. CEO Emma Walmsley responded by freezing dividend payments at 80p a share for what seemed like forever, and diverting the savings into R&D.

The shares are a shocker

While that was a shame for income seekers, I understood her thinking and assumed it would generate superior returns over time.

Many thought peeling off consumer healthcare arm Haleon would help, too. It certainly helped Haleon, whose shares have climbed nicely, but has it worked for GSK? Not so much. Its shares are down 0.99% over one year. But over five years, they’re down 17.25%, which is rubbish, frankly.

Created with Highcharts 11.4.3GSK PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

The GSK share price has fallen 11.3% over the last six months but I wasn’t too concerned, because there was a legal shadow hanging over the company.

GSK had pulled blockbuster heartburn drug Zantac from sale in the US in 2019, following claims that it contained “unacceptable levels” of probable cancer-causing ingredients. GSK called this “inconsistent with the science” and it went to court.

I still think it’s too cheap to resist

The shares crashed 9% on 3 June after a Delaware judge gave the green light to 70,000 Zantac lawsuits. Then Morgan Stanley terrified investors by claiming GSK could take a staggering $30bn hit.

Having bought GSK shares, I was terrified too. But there was a little I could do apart from hang on and hope Morgan Stanley was wrong. So imagine my joy when GSK agreed a $2.2bn settlement covering more than 90% of all legal claims. On 9 October, its shares jumped more than 6% on the news.

And then they fell again. What gives? We’ve all seen how FTSE 100 rival AstraZeneca has transformed itself into the UK’s biggest company. Surely Glaxo can get a piece of that? Not yet, is the disappointing answer. 

GSK has reported a string of positive trial results in the last couple of weeks without moving the dial. But with the stock trading at 9.38 times earnings, well below the FTSE 100 average of 15.4 times, I still think there’s plenty of value here.

Analysts remain optimistic, with the 18 brokers offering one-year price forecasts setting a median share price target of 1,837.5p. If they’re right, that’s up 27.85% from today.

GSK’s yield has crept up to 4%. That’s still below the glory days, but okay. I wouldn’t say GSK is the very best FTSE 100 share to buy today, but it still looks good value to me. I’ll top up my stake the moment I have the cash.

But there are other promising opportunities in the stock market right now. In fact, here are:

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

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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.

Harvey Jones has positions in GSK. The Motley Fool UK has recommended AstraZeneca Plc, GSK, and Haleon Plc. 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.

Like buying £1 for 51p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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