GlaxoSmithKlines(LSE: GSK) shareholders have had a rough ride over the past 12months.
After rocketing to a high of 1,642p at the beginning of April on bid chatter, Glaxos shares have since plunged to a three-year low, following the wider FTSE 100 lower. Year-to-date Glaxos shares have slumped 7.1% excluding dividends while the FTSE 100 has fallen 6.5%, excluding dividends.
However, Glaxos performance could be set to improve throughout the rest of the year as there are a number of catalysts on the horizon, which have the potential to re-energise the companys share price.
Number of catalysts
The first key catalyst that is likely to boost Glaxos share price is the payment of a special dividend later this year. Glaxo is planning to return an additional 1bn of the proceeds from last years Novartis transaction to investors alongside the companysfourth-quarter dividend payment.
A cash return of 1bn is around 20p per share, and the market always pushes up a companys share price ahead of a special dividend. Including the fourth quarter payout, Glaxo is set to payout around 40p per share to investors during next three months.
Whats more, theres also a chance that Glaxos management could bring forward the companys first and second quarter dividend payments for next year, helping investors work their way around the new dividend tax laws set to come into force next year.
Upbeat third and fourth quarter results will also help push Glaxos shares higher towards the end of the year. Indeed, analysts and investors alike are waiting to see Glaxos turnaround strategy start to take hold, and when evidence of this starts to appear, its likely a wave of buying will drive Glaxos shares higher.
Glaxos second quarter results did shed some light on the companys turnaround progress, but theres still much to be done. The integration ofNovartisassets and restructuring planswere on track.Group turnover increased 1% in the first half, and by 2% during the second half of the second quarter. If the company can continue to push sales gradually higher throughout the second half of the year, confidence will return.
Also, alongside the companys third and fourth quarter results, Glaxo will be updating the market about the progress of its product pipeline, which is the best in the business. The company has 258 new products under development more than any other big pharma group. Around 40 of these products are in advanced clinical trials and management expects at least half of its drugs currently under development will be on the market by 2020.
There are plenty of catalysts ahead that could drive Glaxos shares higher before the end of the year, but will they beenough to drive the share price back to 1,600p?
Well, it is possible. Glaxo needs to prove to the market that its dividend yield of 6.2% is here to stay. If management is able to prove that the payout is sustainable, the companys shares will win favour with income investors, who will keep buying until the yield returns to a more normal level of around 5%. Glaxos shares would have to hit 1,600p before the yield reached this level.
If history’s anything to go by, George Osborne’s overhaul of the way UK dividends are taxed will inspire a surge of special dividend announcements over the next nine months.
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