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Glaxo: Healthy Buybacks and Dividends
11/25/2013 8:00 am EST
Our portfolio is beating the S&P 500 by more than 92% since its inception in 2000. A new addition to this portfolio is one of the world's leading research-based pharmaceutical and healthcare companies, notes David Fried in The Buyback Letter.
London-based GlaxoSmithKline PLC (GSK) holds an estimated 7% of the world's pharmaceutical market. The company employs around 99,000 people in more than 100 countries.
The company bases its North American operations in the Research Triangle Park of the Raleigh-Durham area (with about 6,000 employees there).
Glaxo makes almost four billion packs of medicines and healthcare products every year, screens some 65 million compounds every year in a search for new medicines, and supplies one quarter of the world's vaccines.
It is one of the few pharmaceutical companies researching both medicines, and vaccines, for the World Health Organization's three priority diseases—HIV/AIDS, tuberculosis, and malaria, and has developed some of the leading global medicines in these fields.
Glaxo highlighted six drug candidates for R&D delivery at the beginning of 2013, and four have now been approved, showing serious muscle in that arena.
Analysts often consider it a great, financially sound stock to buy and forget (dividends keep rolling in to the tune of 4.7% for 2013; it's big enough to weather storms), and it generates a lot of cash flow, which it uses to reward shareholders with buybacks and generous dividends.
During the past few years, when big pharma was, in theory, vulnerable to cheaper competition, Glaxo grew its dividends and has yielded 4.5%-5.5%. Next year's expectation is 5%.
It also is still focused on reducing costs and improving processes—always a worthy goal. In the last 12 months, management has reduced shares outstanding by 14.92%.
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