Conveyor belt keeps on delivering
Ongoing fears over corruption allegations across the world has dominated investor sentiment towards medicine giant GlaxoSmithKline during the past 12 months. The share price has failed to gain significant traction as a result, and the firm has plummeted 8% since Julys update underlined the extent of these problems in key markets.
Indeed, sales to China alone collapsed by a quarter during the first half to 129m, and with Beijing already jailing a private investigator linked to the company and ex-China chief Mark Reilly still to take the stand, things could be set to get much bumpier for the Brentford-based business.
Still, I have argued that the importance of GlaxoSmithKlines bumper suite of industry-leading products should enable it to ride out such issues in these critical growth regions over the long term. And I believe that the companys terrific product pipeline should deliver red-hot revenues growth.
GlaxoSmithKline currently has around 40 products in late stage development, and believes that 30 assets have the potential to be first-in-class in areas such as respiratory, immuno-inflammation, epigenetics and cardiovascular disease. Of course the route from laboratory to pharmacy shelf can often be a problematic and cost-intensive one, but GlaxoSmithKline has a particularly impressive record in this area.
Indeed, the business received a boost this week when its ViiV Healthcare subsidiary received approval from the US Federal and Drug Administration (FDA) for its single-pill Triumeq HIV treatment. I believe that investors can expect a steady stream of fresh roll-outs in the coming months and years, and with it exceptional earnings growth.
Dividends poised to continue rising
And against this backdrop, I expect GlaxoSmithKline to remain a solid favourite with savvy income chasers.
The company last month raised the second quarter dividend 6% to 19p per share, matching the payout for the previous three-month period. And City brokers expect the payout to move still higher in the coming quarters, with a full-year dividend of 81.2p per share up from 78p in 2013. And for next year this is anticipated to increase to 84.5p.
These projections create mammoth yields of 5.7% and 5.9% correspondingly, smashing a forward average of 3.2% for the FTSE 100 as well as a respective readout of 2.5% for the complete pharmaceuticals and biotechnology space.
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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.